Income tax and pensioners

badmemory

But if you are on the somewhat lower basic state pension any additional bits you may have will be at the 6.7%.  Which means that if you were level when the new pension started you will have dropped back again by now.

Jeremy535897

sheramber said:

https://www.thetimes.co.uk/money-mentor/pensions-retirement/state-pension/pensions-triple-lock

How much will the state pension rise by in 2024?

The CPI inflation figure used in the triple lock is released in October and was 6.7%, while the wage growth element came out in September and was 8.5%.

That means that the state pension will increase by 8.5% in April 2024, meaning:

CPI is a con. RPI was 8.9%.

badmemory

Jeremy535897 said:

CPI is a con. RPI was 8.9%.

Isn't that the reason they changed it.  Personally I wish my cost of living increase for the last few years was under 10% pa but there is little that hasn't gone up by over a third over the 3 years.

Exodi

Jeremy535897 said:

Albermarle said:

dog_nanny said:

Thanks for all the replies. I'll just wait and see what happens later next year. Mum's not hard up but she'll probably be very annoyed if she does get a tax bill, no matter how small!

Many people are over sensitive about tax, and we see posters making poor financial decisions just to avoid small amounts of tax .
Maybe tell your Mum she is only having to pay a bit in tax, because her pension has gone up so much in the last couple of years. It is not strictly true as the freezing of personal allowances has played its part as well, but perhaps do not remind her of that and she may be less annoyed !

Since the pension has only increased in line with inflation, the fact that tax is now payable due to frozen allowances equates to a real cut in income.

Not true, the triple lock flexes between inflation, earnings or 2.5% - hence why it is inherently unsustainable.

When inflation surged in 2022-2023, pensions enjoyed a 10.1% increase on account of inflation. When workers wagers increased in response to that inflation in 2023-2024, pensioners were able to double dip and enjoy a 8.5% increase on account of worker pay rises (this doesn't even include the fact that this increase was calculated during a month which included one off bonuses, with the actual average earnings increase at the time being 7.8%).

I don't know many workers that received a cumulative 19.5% increase over the last two years, personally I find it quite hard to sympathise with. Income tax bands are frozen for everyone, it's a first world problem if ones income is increasing by so much they're worried about the increased tax liability.

(obviously not likely to be a popular opinion on a forum with over 40% retired).

Jeremy535897

Exodi said:

Jeremy535897 said:

Albermarle said:

dog_nanny said:

Thanks for all the replies. I'll just wait and see what happens later next year. Mum's not hard up but she'll probably be very annoyed if she does get a tax bill, no matter how small!

Many people are over sensitive about tax, and we see posters making poor financial decisions just to avoid small amounts of tax .
Maybe tell your Mum she is only having to pay a bit in tax, because her pension has gone up so much in the last couple of years. It is not strictly true as the freezing of personal allowances has played its part as well, but perhaps do not remind her of that and she may be less annoyed !

Since the pension has only increased in line with inflation, the fact that tax is now payable due to frozen allowances equates to a real cut in income.

Not true, the triple lock flexes between inflation, earnings or 2.5% - hence why it is inherently unsustainable.

When inflation surged in 2022-2023, pensions enjoyed a 10.1% increase on account of inflation. When workers wagers increased in response to that inflation in 2023-2024, pensioners were able to double dip and enjoy a 8.5% increase on account of worker pay rises (this doesn't even include the fact that this increase was calculated during a month which included one off bonuses, with the actual average earnings increase at the time being 7.8%).

I don't know many workers that received a cumulative 19.5% increase over the last two years, personally I find it quite hard to sympathise with. Income tax bands are frozen for everyone, it's a first world problem if ones income is increasing by so much they're worried about the increased tax liability.

(obviously not likely to be a popular opinion on a forum with over 40% retired).

I know that. I was merely observing that RPI, a better measure of inflation than CPI, was 8.9% so the triple lock still only delivered inflation (a bit less in fact). Then tax on some of the increase reduces the impact on net income further. Our state pension is one of the measliest in the developed world, and Brown's raid on pensions for the private sector means most people now will receive a private pension that is worth much less than the gold plated defined benefit schemes the public sector enjoy.

Albermarle

Exodi said:

Jeremy535897 said:

Albermarle said:

dog_nanny said:

Thanks for all the replies. I'll just wait and see what happens later next year. Mum's not hard up but she'll probably be very annoyed if she does get a tax bill, no matter how small!

Many people are over sensitive about tax, and we see posters making poor financial decisions just to avoid small amounts of tax .
Maybe tell your Mum she is only having to pay a bit in tax, because her pension has gone up so much in the last couple of years. It is not strictly true as the freezing of personal allowances has played its part as well, but perhaps do not remind her of that and she may be less annoyed !

Since the pension has only increased in line with inflation, the fact that tax is now payable due to frozen allowances equates to a real cut in income.

Not true, the triple lock flexes between inflation, earnings or 2.5% - hence why it is inherently unsustainable.

When inflation surged in 2022-2023, pensions enjoyed a 10.1% increase on account of inflation. When workers wagers increased in response to that inflation in 2023-2024, pensioners were able to double dip and enjoy a 8.5% increase on account of worker pay rises (this doesn't even include the fact that this increase was calculated during a month which included one off bonuses, with the actual average earnings increase at the time being 7.8%).

I don't know many workers that received a cumulative 19.5% increase over the last two years, personally I find it quite hard to sympathise with. Income tax bands are frozen for everyone, it's a first world problem if ones income is increasing by so much they're worried about the increased tax liability.

(obviously not likely to be a popular opinion on a forum with over 40% retired).

Although I think for a lot of the retired on here, the SP is only a supplement to a much bigger private provision.
So whether it goes up 6% or 8% is having no material effect. 

badmemory

Let us also not forget that the year before they did not honour the triple lock.  Then there are those of us older state pensioners who had no access to private pensions until we had been workingl over 30 years.  None of which makes it right that those struggling on minimum wage should have to struggle.  Isn't it interesting that the longer the tories are in power the more like a communist I sound (theoretical only folks).

Exodi

badmemory said:

Let us also not forget that the year before they did not honour the triple lock.

Your username seems quite fitting! I appreciate you bringing this up:

The reason they 'did not 'honour the triple lock' the year before (2021-2022) was because the year before that (2020-2021 AKA Covid) saw average earnings decrease due to furlough and legislation prevented the Secretary of State from making an uprating order where earnings growth is negative. To avoid this, the Government introduced the Social Security (Uprating of Benefits) Act 2020, allowing the triple lock to be implemented in 2021/22. Relevant State Pensions were uprated by 2.5%.

Then the following year (2021-2022, as you say where they 'did not honour the triple lock'), obviously as furlough ended and people slingshotted back up to their normal pay, you had massive, but misleading, average earnings increases of 8.4%. The Government said it was “a distorted reflection of earnings growth” reflecting recovery from furlough and other pandemic-related measures. To address this, the Social Security (Uprating of Benefits) Act 2021 suspended the earnings element of the triple lock for the 2022/23 financial year. Instead, State Pensions increased by 3.1% in line with the Consumer Prices Index (CPI).

And again, the period I mention (the recent double dipping on inflation + worker pay increases) and the period you mention just plainly highlight how inherently unsustainable the triple lock is.

Grumpy_chap

Jeremy535897 said:

the triple lock still only delivered inflation (a bit less in fact). Then tax on some of the increase reduces the impact on net income further. 

I am not sure that is an effect limited to pensioners.
An employee receiving an inflation-linked pay rise may move into a different tax band as a result so the increase in nett income is below inflation.

geordiejon

Exodi said:

Jeremy535897 said:

Albermarle said:

dog_nanny said:

Thanks for all the replies. I'll just wait and see what happens later next year. Mum's not hard up but she'll probably be very annoyed if she does get a tax bill, no matter how small!

Many people are over sensitive about tax, and we see posters making poor financial decisions just to avoid small amounts of tax .
Maybe tell your Mum she is only having to pay a bit in tax, because her pension has gone up so much in the last couple of years. It is not strictly true as the freezing of personal allowances has played its part as well, but perhaps do not remind her of that and she may be less annoyed !

Since the pension has only increased in line with inflation, the fact that tax is now payable due to frozen allowances equates to a real cut in income.

Not true, the triple lock flexes between inflation, earnings or 2.5% - hence why it is inherently unsustainable.

When inflation surged in 2022-2023, pensions enjoyed a 10.1% increase on account of inflation. When workers wagers increased in response to that inflation in 2023-2024, pensioners were able to double dip and enjoy a 8.5% increase on account of worker pay rises (this doesn't even include the fact that this increase was calculated during a month which included one off bonuses, with the actual average earnings increase at the time being 7.8%).

I don't know many workers that received a cumulative 19.5% increase over the last two years, personally I find it quite hard to sympathise with. Income tax bands are frozen for everyone, it's a first world problem if ones income is increasing by so much they're worried about the increased tax liability.

(obviously not likely to be a popular opinion on a forum with over 40% retired).

yes but the rise which started at £10600 is less than the national wage 
£35,000 at 4.5% so don't have a go at people who are on the lowerer end of the pay scale and work on figures.