Chancellor Rachel Reeves has been criticised for a policy that could force around 600,000 more over-65s to pay tax over the next 12 months. The controversial move keeps tax bands frozen at 2021 levels, meaning more pensioners are pushed into higher tax brackets as the state pension rises under the triple lock.
Fiscal Drag Hits Pensioners
This phenomenon, known as fiscal drag, allows the government to collect more tax as incomes increase. Critics argue it unfairly targets households, including pensioners, who are now edging closer to the £12,570 personal allowance threshold. Over-65s relying solely on the state pension will not be taxed, but those with small private pensions or savings interest may exceed the limit.
Reactions from Critics
An Assistance for Seniors spokesperson said: 'This is no longer a problem affecting only those with substantial pension pots. We are fast approaching a point where simply receiving the full state pension, alongside even a modest amount of savings interest, is enough to trigger a tax bill.'
Derence Lee, chief finance officer at Shepherds Friendly, added: 'With the full new state pension rising to £11,973, and personal allowance now frozen at £12,570 until 2031, more retirees are edging dangerously close to paying income tax on their state pension. The triple lock has helped pensioners keep pace with inflation, but if the tax-free allowance remains frozen, recent state pension increases could effectively be taken back through income tax.'
