Pension alert as 400,000 older Britons to be hit with retirement tax 'for the first time'
Pensioners face being hit with a retirement tax for the "first time"
GETTY
New research suggests that 420,000 pensioners are in line to be slapped with a pricy retirement tax "for the first time" within the next couple of years.
This is due to the impact of fiscal drag on peoples' incomes with the state pension expected to exceed the personal savings allowance on pensions.
As it stands, the tax-free threshold is sitting at £12.570 with Britons not losing any of their earnings if the sum comes under this amount.
Under the triple lock, state pensions are guaranteed to increase by either the rate of inflation, average wages of 2.5 per cent; whichever is higher.
In April to June of this year, average earnings jumped by 4.5 per cent, according to the Office for National Statistics (ONS).
With the consumer price index (CPI) rate of inflation floating at around 2.2. per cent, experts believe wages are likely to be the metric for determining the triple lock.
Do you have a money story you’d like to share? Get in touch by emailing money@gbnews.uk.
Britons are losing more of their money to fiscal drag
PAIf a 4.5 per cent rate rise was implemented, the full new state pension would increase from £221.20 to £231.15 every week.
As such, the retirement benefit would be sitting at £12,061 annually which puts it within striking distance of the personal savings allowance.
Experts are sounding the alarm that 400,00 older people are in the firing line of HMRC unless changes are introduced to the triple lock.
Former pensions minister Sir Steve Webb warned older households to prepare for potentially falling foul of the tax-free threshold.
The partner at LCP highlighted that around 2.5 million people claiming the state pension are already to be likely getting an income over the allowance.
He explained: "An increase of 4.5 per cent in the state pension could easily bring around 400,000 more pensioners into income tax for the first time.
"This is more people who may have to deal with HMRC or face end-of-year tax demands for a relatively small amount of money.
"The link between the level of the tax-free allowance and the level of the state pension needs to be urgently reviewed."
On top of this, the Government has recently promised to means-test the Winter Fuel Payment which removes up to £300 in energy bill support from millions.
Potential claimants will need to be in receipt of Pension Credit to get this assistance but 10 million pensioners are not eligible for this benefit.
LATEST DEVELOPMENTS:
Britons are waiting months for their pension savings to be transferredGETTY During the General Election campaign, the Labour Party ruled out introducing the "triple lock plus" which was floated by the Conservatives.
Under this policy, the tax-free allowance on pensions would rise in line with the triple lock and would ensure Britons do not pay a levy on their state pension.
A HM Treasury spokesman said: "Older people should be able to live with the dignity and respect they deserve, and the State Pension is the foundation for this.
"We are committed to the Triple Lock, and pensioners whose sole income is the new state pension and who have not deferred or receive protected payments do not pay any income tax.”