People may have wondered why former chancellor and now PM Rishi Sunak and his own chancellor Jeremy Hunt were smiling sickly when they announced the headline grabbing support for the triple lock on pensions to be paid this year after whingeing about every other payment made from the public purse to support the less well off with positive means testing and the ability to investigate peoples bank accounts being awarded to Government bodies from this April?
The answer is it's becoming very close to being self financing as the static retention of tax thresholds at which 20% tax becomes payable has remained at £12,570 per year for the past 3 years, and is planned to remain frozen for the next 5 years, so as the State Pension increases to keep pace with inflation of earnings growth, more of the pension increase will become taxable.
It's thought that between 900,000 and 1000,000 additional pensioners will be caught up in this scandal this year as savings are also counted as income under this Government’s drive to make more people worse off as ever more people will fall through the poverty trap of being denied pension credit over the next five years.
This government's view of ‘Your savings and investments’ If you have £10,000 or less in savings and investments this will not affect your Pension Credit.
If you have more than £10,000, every £500 over £10,000 counts as £1 income a week. For example, if you have £11,000 in savings, this counts as £2 income a week.
Why is this happening to us you may ask? State Pensions rose by 10.1% in April 2023, and are due to rise by 8.5% from 8 April this year, taking tens of thousands of people out of a pension credit situation even if they have the most meagre of second pensions from former employment, this is the secondary stealth tax being imposed on pensioners.
In our example we will use a retired mineworker, most were born before April 1951 and only receive the basic state pension valued from April 2024 £8837 with an average mineworkers pension of £84 per week adding an additional £4379 in our example he has savings below £10,000. With the tax threshold being fixed for pensioners at £12,570 he will receive a bill from HMRC for £129.20 and as his pension grows over the next five years he will pay more tax each year, shrinking his weekly increase in pension from £13.30 down to £10.82 hardly helping this retired mineworker out of poverty while living through a period when food inflation has topped a 31% increase since tax thresholds were frozen by Rishi Sunak three years ago.
Across Northumberland, Tyne and Wear and Durham thousands will be caught up in this dreadful treatment of ex industrial workers from the shipbuilding, mining and steel manufacturing industries along with many more serving their communities as both local government and the civil service average retirement pensions sit around £4807 per year.
The number of pensioners paying tax has increased by 43% over the last decade due primarily to periods of frozen allowances through the Conservative designed austerity plans and more recently Sunak’s economic crisis. This figure is expected to rise closer to 85% of pensioners paying income tax over the next five years pressurising Councils to support rent and council taxes at a much higher rate just as their finances crumble.
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