A financial expert has warned of a "real issue" facing millions of pensioners as a major change to the state pension approaches, with Andy Burnham potentially reviewing existing commitments.
The Government previously said it would introduce a tax change so that those whose only income is the state pension without increments will not have to pay income tax. This new policy was needed because under current rules, those on the full new state pension will have to pay tax on their payments from April 2027.
Tax threshold concern
The full new state pension currently pays £241.30 a week, or just under £12,550 a year. This is very close to using up the personal allowance of £12,570, the maximum amount you can earn each year without paying income tax. The full new rate will definitely cross the line and attract an income tax bill from next April, thanks to the triple lock increase.
Mark Pemberthy, benefits consulting leader at consultancy firm Gallagher, was asked if there could be changes in this area. He said: "A change of Prime Minister creates an opportunity to review existing commitments before the next fiscal event."
Autumn Budget set for October 28
The next key financial event will be the Autumn Budget, when the Government sets out its latest fiscal policies. This is set for October 28. The Government has yet to set out the details about how the new tax exemption rule will work. Mr Pemberthy said the reality is many pensioners are at risk of being dragged into paying tax.
He said: "Unless the personal allowance increases by more than the state pension next year, this will become a real issue for millions in April 2027. Andy Burnham has already identified the personal allowance as a key issue and any significant increase may mitigate this problem."
"Either way, the new Government has to confirm how it intends to deliver that commitment before the end of this year. This will be an early indicator of whether he will honour commitments of his predecessor and how he balances the needs of pensioners and working people."
