State pensioners have been cautioned that their payments are edging “perilously close” to the income tax threshold, as set by HMRC. The personal allowance currently stands at £12,570 annually, while state pension payments are due to rise by 4.1% in April, adhering to the triple lock policy, reports Birmingham Live.
This increase will bring annual state pension receipts to £11,975.60, leaving a narrow margin of £595 below the threshold. Rachel Vahey, AJ Bell’s head of public policy, highlighted the looming issue: “The state pension will be at a level perilously close to the frozen personal allowance and should overtake it in a couple of years if things continue, thanks to frozen tax thresholds.”
She further elaborated on the potential implications: “At that point something must surely give. But slowing the increase in state pension growth or unfreezing the personal allowance both seem unlikely. It could be that this fast-approaching crunch time means the Government will finally be forced to address the question of how much the state pension should really offer, at what age, and how it can increase payments sustainably each year.”
Vahey also touched upon lingering discontent: “Criticism of the decision to scrap the Winter Fuel Payment for all pensioners except those that claim Pension Credit still lingers. Government will hope this rise in Brits’ state pensions will publicly reinforce its commitment to the triple-lock, although some will still be reeling from the £200 most pensioners lost this winter.”
Steve Webb, the former pensions minister and now a partner at consultancy LCP, has commented on the upcoming April increase, stating: “Based on the current inflation figure of 2.2%, the new state pension would need to rise by just over £250 simply for pensioners to stand still.”
He further added, “While an above-inflation increase of £460 [a year] will be welcomed, only the further £210 represents a real increase. And this is before allowing for the income tax which most pensioners will pay on their state pension rise. Those who lose £200 or £300 in winter fuel payments will therefore still be worse off in real terms next April.”
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