State pensioners set to breach tax threshold under ‘triple lock’ boost

People on the full state pension are set to breach the personal tax allowance for the first time after official earnings data put them in line for a rise of nearly £500 a year from next April.Under the triple lock guarantee, the state pension increases every April in line with whichever is the highest of total earnings growth in the year from May to July of the previous year, CPI (Consumer Prices Index) inflation in September of the previous year, or 2.5%.The latest figures from the Office for National Statistics (ONS) showed total wage growth, including bonuses, stood at 3.9% in the quarter to July, down from 4.2% in the three months to June.However, these figures are subject to revision and the final piece of the triple lock puzzle will not come until inflation figures for September are published in October.Inflation currently stands at 2.9%, but figures on Wednesday are expected to reveal it jumped to 3.2% in August on the back of soaring fuel prices caused by the Iran war.If earnings growth is confirmed at 3.9%, this would add £9.40 a week to the state pension, taking it to £250.70, an increase of just under £500 per year, to £13,036, according to experts.With the personal tax allowance having been frozen at £12,570 since 2021, it means state pensioners will be caught within the tax net for the first time.The Government has so far said pensioners who are wholly dependent on the new state pension – with no private pension – or the old “basic” pension, “with no increments”, will not have to pay tax, but has not set out how this will work.Former Liberal Democrat pensions minister Sir Steve Webb, who is now a partner at consultants LCP (Lane Clark & Peacock), warned the Government’s move to create a “tax amnesty” for pensioners will only protect one in 16 retirees.Sir Steve said: “Those on the new state pension can expect to see an increase of nearly £500 per year next April.Read More“But the sting in the tail is that this will take the standard rate of the new state pension above the tax threshold.“The Government’s plans to address this point are a mess, and likely to benefit only a small fraction of pensioners.“They will also create unfairness between different groups of pensioners and between pensioners and low-paid workers, who do not qualify for any exemption.”