The Department for Work and Pensions (DWP) state pension waiver proposed by Prime Minister Andy Burnham could create a "two-tier tax system", according to a tax expert. Under current forecasts, the state pension could rise by 3.9 per cent next April, with wage growth currently the highest of the three triple lock metrics.
The increase could push the state pension above the £12,570 personal allowance set by HMRC. Mr Burnham has confirmed that low-income state pensioners will be shielded from tax bills, with him and Chancellor John Healey promising a waiver for people living solely off DWP payments.
Maiden speech at Labour conference
Makerfield MP Mr Burnham made the confirmation earlier this week at the Labour conference in Liverpool. It was his maiden speech as Prime Minister, having replaced Sir Keir Starmer this summer.
Paul Robbins, director of Tax at Croner, said: "It's likely there will be a 'special pensioner exemption' to ensure those pensioners wholly dependent on the state pension as their only income source, will not suffer an unfair tax burden."
Mr Robbins added: "This approach could result in a rather messy two-tier tax system. It remains to be seen how this will work in practice."
Funding concerns and potential tax hikes
Mr Robbins said such relief "will undoubtedly require funding by tax hikes elsewhere, potentially in the corporation tax rates". He added: "As we await the highly anticipated Autumn Budget, anything could happen but, for now at least, it appears that pensioners' state pension income is safe."
The BBC went to a bingo club in Worcester, where people expressed concerns about the impact of the changes.
Pensioners voice worries
Mary Davies, 89, said: "I think it's wrong - people of our generation will be missing out." But Mr Burnham said it was a "good deal for pensioners".
Barbara Weston, 75, a former retail worker, said: "The triple lock is very important - we've got a small pension anyway, compared to many other countries. We're not living life to the full as it is, because we don't have enough money - how is this going to change that? We haven't got enough in the pot to pay for everything we need. I don't think putting it into social care is a fair trade-off."
Margaret Smith, 89, said: "You hear so many stories of older people who can't afford to heat themselves properly or eat well - nobody should be in that state. I'd be concerned if we end up falling behind where the pension should be."
