Andy Burnham has completed the state pension job started by former chancellor Rachel Reeves, according to critics. The freeze on the £12,570 tax-free personal allowance, now extended until April 2031, means the state pension will rise above the threshold due to the triple lock, triggering tax bills for many pensioners.
How the Tax Freeze Affects Pensioners
The full new state pension currently stands at £12,547, just below the personal allowance. Even with a 2.5% rise—the smallest possible under the triple lock—it would reach £12,861 next April, exceeding the allowance by £291. The gap is expected to widen due to inflationary pressures.
Reeves had promised that retirees reliant solely on the state pension would pay no income tax during this Parliament. However, this pledge largely applies only to those receiving the new state pension with no other income. Older retirees on the basic state pension often receive additional state pension (SERPS or state second pension), which is taxable and can push their total income above the allowance.
Cliff Edge for Savers
Analysis by retirement specialists LCP estimates that by 2029/30 the full new state pension could be worth £13,671—£1,101 above the personal allowance. While those with no other income still avoid tax, earning just £1 from a private pension, savings interest, or part-time work triggers tax on both that income and the portion of the state pension above the threshold. This could result in a tax bill of around £220 on a single extra pound of income.
Critics argue this creates a punitive cliff edge, punishing pensioners who saved modestly for retirement. Burnham, as chancellor, has chosen to implement the policy despite inheriting it from Reeves. The freeze is expected to continue affecting low-income savers for years.
