Campaign to Protect the State Pension from Tax
A campaigner has urged Chancellor Rachel Reeves to take decisive action to prevent older citizens from having to pay tax on their state pensions.
The concern arises as pensioners increasingly find their state pension payments pushing them over the tax-free personal allowance threshold. The call emphasizes that without reform, millions of retirees could face unexpected tax liabilities on income that was once untaxed.
The Core Recommendation
"The Chancellor must raise the personal allowance in line with the state pension to ensure retirees are not penalized," the campaigner stated.
This proposal aims to link the personal tax threshold directly to the annual rise in state pension payments. Advocates say such alignment would protect pensioners from fiscal drag, where tax thresholds fail to keep pace with inflation or state benefit increases.
Background and Impact
The issue stems from the government’s "triple lock" policy, which annually increases the state pension by the highest of inflation, wage growth, or 2.5%. While beneficial for retirees, these increases inadvertently push more pensioners into the taxable bracket each year.
Experts warn that unless the Treasury adjusts the personal allowance accordingly, many pensioners with modest incomes will continue to face growing tax burdens.
"Failing to act means older people will lose a portion of their hard-earned income to tax, despite promises to support them in retirement," a financial adviser said.
Economic Considerations
Officials at the Treasury are reportedly reviewing potential implications but have not committed to any change. Critics argue that protecting pensioners' incomes could also help sustain consumer confidence among older demographics, reducing pressure on public welfare services in the long term.
Author’s summary: A campaigner is urging Rachel Reeves to align personal tax allowances with rising state pensions to prevent more retirees from being taxed on their retirement income.
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