The Conservative Party has announced plans to increase the tax-free pension allowance through a ‘triple lock plus’ if they remain in power following the general election.

Under the plans, pensioners’ personal allowance, above which basic-rate income tax is paid, will be triple locked to rise by 2.5 per cent or by whichever is higher out of average annual earnings increases or inflation.

Prime Minister, Rishi Sunak, said the proposal demonstrated the Conservatives were “on the side of pensioners”, although the Labour Party said it was not “credible”.

Currently, the income tax personal allowance for pensioners is £12,570 a year, the same level of personal allowance as those in work, and has been frozen since April 2021 during Boris Johnson’s stint as Prime Minister.

The full state pension is currently £11,542 and, with both parties announcing their commitment to maintaining the state pension triple lock, the full state pension would likely exceed the personal allowance within three or four years.

Eight million people would save around £100 next year under ‘triple lock plus’, according to the Tories, rising to £275 by 2030.

“Today’s announcement will help many pensioners who have workplace or private pension income keep more of it by ensuring future increases in the new state pension do not in themselves result in pensioners paying more income tax than they do now,” said Pensions and Lifetime Savings Association director of policy and advocacy, Nigel Peaple.

“This is likely to be welcomed by pensioners. However, it is also important that the main political parties commit to improving the workplace pensions of younger workers by increasing the value of automatic enrolment pension contributions, gradually, over the next decade, from 8 per cent to 12 per cent of salary, with most of the rises falling on the employer.”

Institute of Fiscal Studies director, Paul Johnson, commented: “The proposal to ‘triple lock’ the income tax allowance for pensioners is another example of Conservatives proposing to undo their own tax policies.

“Pensioners used to have a higher tax allowance than working-age people, but since 2010 the tax allowance for pensioners has been cut by more than 10 per cent while that for working age people has risen by 30 per cent.

“Going forward about half of this proposed tax cut is simply not following through with plans for tax rises pencilled in for the next three years.”

Also commenting on the announcement, Standard Life retirement savings director, Mike Ambery, said the combination of the state pension triple lock and freezing of the pension allowance had dragged more and more pensioners into the tax system.

“There is some precedent for different allowances for pensioners as they are currently exempt from National Insurance payments on earnings but this would be an additional advantage,” he continued.

“The question likely to hang over this approach is one of intergenerational fairness as while there are a large group of pensioners struggling to get by, there are also many who are comparatively well off and it appears the policy would apply to both groups.”

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