Rishi Sunak has promised to raise the tax-free pension allowances as part of a Triple Lock Plus scheme should his party be re-elected.
Under a future Tory government, pensioners would enjoy an increase in personal tax allowances that correlates with either the highest of earnings, wages or 2.5%.
In total, the promise would be equivalent to an annual £2.4 billion tax break for pensioners.
The move signals MR Sunak’s attempts to appeal to older voters ahead of the surprise July 4 election.
Speaking about the proposed policy, Mr Sunak said: “This bold action demonstrates we are on the side of pensioners. The alternative is Labour dragging everyone in receipt of the full state pension into income tax for the first time in history.”
However, Labour has already widely criticised the announcement as a “desperate move”.
The announcement came just days after Mr Sunak announced plans to introduce national service for 18-year-olds, which may have actually alienated younger voters even more.
The Triple Lock Pension Plus explained
The pension triple lock was introduced in 2010 as a government guarantee that pensions would rise each year in line with inflation. Under both Labour and the Conservatives, the triple lock is expected to stay in place.
However, the “triple lock plus” is different from the standard triple lock as it focuses on personal allowance benefits.
Pension payouts are usually taxable, but the triple lock plus means more pensioners can enjoy tax-free perks.
The policy would also increase the income tax personal allowance in line with inflation levels, meaning pensioners’ tax-free allowance would rise year-on-year.
The move also doesn’t impact non-pensioners, who still have the same tax threshold ever since it was frozen in 2021.
The new policy would cost taxpayers around £2.4bn and reportedly give more than 8 million pensioners a tax cut of around £100. This would grow to around £300 over the next few years.
However, the news has faced criticism from various angles.
Paul Johnson, director of the Institute for Fiscal Studies, pointed out on social media that the saving would actually just be an avoidance of another tax increase.
“About half the cost of this is just not imposing the planned tax increase (via 3 more years of freezing allowances) on pensioners. So the £100 ‘saving’ next year is mostly just avoiding a £100 tax increase, rather than an actual giveaway,” he said on X.
Jonathan Ashworth, the shadow Cabinet Office minister, added: “Why would anyone believe the Tories and Rishi Sunak on tax after they left the country with the highest tax burden in 70 years?”
