Tories pledge £2.4bn tax cut for pensioners with ‘triple lock plus’ allowance
28 May 2024, 05:42 | Updated: 28 May 2024, 06:43
Rishi Sunak will unveil plans to raise the tax-free pension allowance on Tuesday via a ‘triple lock plus’ if the Tories win the general election.
Listen to this article
Loading audio...
The Prime Minister will pledge to increase the personal allowance for pensioners by at least 2.5%, in line with the highest earnings or inflation.
Mr Sunak's new tax policy would see the age-related allowance rise in line with the increase to the state pension under a "triple lock plus" guarantee.
It would mean that both the state pension and the allowance - the amount that can be earned before being liable to income tax - rise in line with inflation, average wages or 2.5%, whichever is highest.
The move will give pensioners a tax cut worth around £95 in 2025-26, rising to £275 in 2029-30, according to Conservative estimates.
Follow the LBC live General Election blog for all the twists and turns of the campaign train and listen live to LBC on Global Player, our official app
Income tax thresholds have been frozen since 2021. Income tax is also paid on money received via pensions.
The state pension is expected to be higher than the tax-free personal allowance by 2027, according to the independent fiscal watchdog Office for Budget Responsibility (OBR).
The Tory scheme would mean the state pensions always remain below the tax-free threshold.
Mr Sunak has said the pledge reflects that the Tories are “on the side of pensioners”.
He said: “Thanks to the Conservatives' triple lock, pensions have risen by £900 this year and now we will cut their taxes by around £100 next year.
"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 dubbed the tax policy as a “desperate move from a chaotic Tory party".
Institute for Fiscal Studies director Paul Johnson said about half the cost of the plan was from not imposing three more years of frozen personal allowances on pensioners.
"So the £100 'saving' next year is mostly just avoiding a £100 tax increase, rather than an actual giveaway," he said.
Shadow paymaster general Jonathan Ashworth said: "Why would anyone believe the Tories and Rishi Sunak on tax after they left the country with the highest tax burden in 70 years?"
It comes as Labour's own claims to economic credibility received a boost with a letter signed by 121 senior business figures including chef Tom Kerridge and Wikipedia founder Jimmy Wales in The Times.
The signatories said the country needed a “new outlook” and the upcoming General Election offered “the chance to change the country”.
The business leaders – including the Founder of Iceland Sir Malcolm Walker, Chair of Ancient+Brave and Tortilla Mexican Grill Emma Woods, former chief executive of Aston Martin and Nissan Andy Palmer, former CEO of Heathrow John Holland-Kay, CEO of Koru Kids Rachel Carrell – said the Labour Party “has shown it has changed and wants to work with business to achieve the UK’s full economic potential.”
