Zarah ChoudharyJon Greer, head of retirement policy at Quilter, commented on the rumours that Rachel Reeves may extend the Income Tax threshold freeze to 2030, and particularly its impact on pensioners.
According to Greer, the possibility that Rachel Reeves might extend the tax threshold freeze would deal another blow to pensioners.
With 3.1 million retirees already set to be pushed into higher tax brackets by 2027/28, as revealed by a Freedom of Information request in August, the freeze is becoming a tax burden for older Brits.
Projections based on the data suggested that the move could force an additional one to 1.5 million pensioners into higher or additional rate tax brackets.
Greer said: “The triple lock may increase state pensions, but with tax thresholds frozen, many will find themselves paying taxes on what should be a lifeline during retirement.
“For those with a combination of state and private pensions, the hit will be felt even sooner, eroding their incomes at a time when financial security is crucial.”
He noted that Reeves’ decision to scrap the Winter Fuel Payment may further worsen the situation, putting pensioners under financial pressure.
Greer said: “If you have reached state pension age but do not wish to retire, you have the option to defer your state pension.
“If you reach state pension age on or after 6 April 2016 and opt to defer it, for every nine weeks you defer, your state pension will increase by 1%.
“While this can be a good option for those who are still working and do not yet require their state pension funds, it is important to remember that the additional amount is then paid with your regular state pension payment and could be subject to tax.”
