State Pension rise 2024/2025 story

Sarahspangles

FIREDreamer said:

MK62 said:

True, but then does it really matter how a pensioner's income is made up, whether SP alone or SP+other pension...surely it's the total which matters.....the net effect of fiscal drag is that both might well be dragged into paying tax.

Anyone today on £8814pa (max BSP) and say £3700pa in "other" pensions (so £12514 total) is above the pension credit threshold, and so will lose WFA. In April, they will likely see their state pension rise with the triple lock (looks like being 4.5%) to £9211pa, and their other pension probably by CPI (maybe 2.2%) to £3782pa, for a total of £12993.....hello taxman, who will then relieve them of £85 in income tax........is this what the govt should be doing to older people of limited means?

I think this government has already demonstrated its contempt for pensioners.

Surely new tranches of pensioners paying tax on SP was ‘baked in’ as soon as the personal allowance was frozen by the previous administration. The only uncertainty was the pace at which it would happen. The WFA has now been removed but only for those not requiring benefit top ups. There’s a group facing a double whammy, which is unfortunate, but it just puts them in the same position as working age low-income families. 

Exodi

MK62 said:

True, but then does it really matter how a pensioner's income is made up, whether SP alone or SP+other pension...surely it's the total which matters.....the net effect of fiscal drag is that both might well be dragged into paying tax.

Anyone today on £8814pa (max BSP) and say £3700pa in "other" pensions (so £12514 total) is above the pension credit threshold, and so will lose WFA. In April, they will likely see their state pension rise with the triple lock (looks like being 4.5%) to £9211pa, and their other pension probably by CPI (maybe 2.2%) to £3782pa, for a total of £12993.....hello taxman, who will then relieve them of £85 in income tax........is this what the govt should be doing to older people of limited means?

Sorry I think you're missing the point. Your original point was that if someone was dragged into paying tax, then technically they were not receiving an increase of CPI, but less on account of tax. My response was you're framing this around someone that happens to be just under the threshold. For anyone over the threshold already, triple lock increases would have always had tax taken from them - this isn't a new thing. Just yet again more cherry-picked examples as has been rife with the winter fuel allowance.

So I'm not sure what the conclusion is - yes I think pensioners should not be exempt from paying tax? Sorry.

Plus, call me a big ol' meany but... £85 tax on £12,993?

Of course the Daily Mail will run with that and declare "WAR ON PENSIONERS" or "THEY'RE COMING FOR YOUR PENSIONS" and the easily influenced will swallow it up.

Speak of the devil...

FIREDreamer said:

MK62 said:

True, but then does it really matter how a pensioner's income is made up, whether SP alone or SP+other pension...surely it's the total which matters.....the net effect of fiscal drag is that both might well be dragged into paying tax.

Anyone today on £8814pa (max BSP) and say £3700pa in "other" pensions (so £12514 total) is above the pension credit threshold, and so will lose WFA. In April, they will likely see their state pension rise with the triple lock (looks like being 4.5%) to £9211pa, and their other pension probably by CPI (maybe 2.2%) to £3782pa, for a total of £12993.....hello taxman, who will then relieve them of £85 in income tax........is this what the govt should be doing to older people of limited means?

I think this government has already demonstrated its contempt for pensioners.

The only reason they hit pensioners first was because they wouldn't have been able to announce it during the budget and enact it this year. Pain is down the road for the rest of us at the end of next month.

xylophone

The WFA has now been removed but only for those not requiring benefit top ups. 

For those not in receipt of pension credit.

https://www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/large-print-factsheets/fs48-lp-pension-credit.pdf

Guarantee Credit

The maximum weekly amounts for 2024/25 are:

Single people £218.15

Couples £332.95

Thus a single pensioner with income of say £220 a week would not be entitled to PC and so would lose the WFA.

MK62

Exodi said:

MK62 said:

True, but then does it really matter how a pensioner's income is made up, whether SP alone or SP+other pension...surely it's the total which matters.....the net effect of fiscal drag is that both might well be dragged into paying tax.

Anyone today on £8814pa (max BSP) and say £3700pa in "other" pensions (so £12514 total) is above the pension credit threshold, and so will lose WFA. In April, they will likely see their state pension rise with the triple lock (looks like being 4.5%) to £9211pa, and their other pension probably by CPI (maybe 2.2%) to £3782pa, for a total of £12993.....hello taxman, who will then relieve them of £85 in income tax........is this what the govt should be doing to older people of limited means?

Sorry I think you're missing the point. Your original point was that if someone was dragged into paying tax, then technically they were not receiving an increase of CPI, but less on account of tax. My response was you're framing this around someone that happens to be just under the threshold. For anyone over the threshold already, triple lock increases would have always had tax taken from them - this isn't a new thing. Just yet again more cherry-picked examples as has been rife with the winter fuel allowance.

Well firstly, as I was illustrating the point of someone just below the threshold being dragged into paying tax, it's hardly surprising that I used an example of .....someone just below the threshold.......

As for someone over the threshold, yes they are already paying tax (not sure what your point is there)......are you saying fiscal drag doesn't affect them? It's not paying tax on income above the threshold per se.....rather it's should that threshold ever have been frozen, and what effect that freeze is having. Those who are now above the threshold may have still been below it without this "fiscal drag" policy......if not for this policy, the PA would now be around £15200, and would have been set to increase to around £15500 in April 2025.

As for the WFA, over 10 million pensioners are set to lose it.......so who should we pick as a typical example of someone who might well suffer hardship as a result.......a pensioner with £50000pa income, or one with about £11500-£12500? Nobody is saying that well off pensioners don't exist.......or that such pensioners need the WFA.....or that they shouldn't pay tax......but, pensioners above the pension credit threshold are not ALL well off, far from it.

On the subject of the actual tax, £85 may not sound that much to you or I, but to an OAP living on c£13k pa, that might not be the case for them.......and it might be £85 next year, but how much the year after, and the year after that?

Hoenir

To paraphrase Starmer. To decorate the room we need to peel the wallpaper off and actually see what lies behind. Everybody benefitted in some form from Covid and Energy crisis handouts. Time to pay the bill. Not simply print the money and let a future generation deal with the matter. 

sgx2000

Surely this is financial stupidity.....

For someone on just the SP  to eventually pay a tiny amount of tax on the tiny amount over the 12k....
The cost to HMRC to get this tiny amount just doesnt seem sensible....

Surely the base rate has to be at what the SP is?
Yes I know this would then carry forward to the tax for the working population.....

Perhaps a simpler solution would be a law change, that whatever the SP is.. it will not be taxed...(even if over base rate) i.e. a new tax band for pensions...

TheBanker

MK62 said:

I guess we'll have to wait and see what govt does here.......not going to look good giving pensioners a CPI rise and then taking some of that back as tax, leaving the net rise below CPI......which is why I don't think it will happen tbh......but who knows what the govt are thinking on this?

It also would not look good if they said the current tax threshold needed to be raised for pensioners, but not for a working person earning the same amount... and the worker will be paying more as they are also subject to NI, and likely have higher living costs. 

I think the government might do something though - because the State Pension is taxable but tax isn't deducted, they need another way to collect the income. This can be through the tax code if said pensioner also has other income (e.g. a private pension). If not HMRC will need to send them a bill. This would be quite a lot of admin to collect a relatively small amount of tax, and would add fuel to the fire when the press start showing pictures of upset looking pensioners holding up their tax demand for the camera. There will be stories of pensioners who did not realise they were now subject to tax, haven't been putting away money to cover it and now can't afford the bill. And lots of complaints from pensioners who want to speak to someone about their bill but can't get through to HMRC, or get passed back and forth between DWP/HMRC. 

Ultimatley if we want to collect tax on state pensions, then the DWP needs to start paying them through an equivelent of PAYE, with HMRC issuing tax codes so the DWP know how much to deduct (and treating people with both state and private pensions like they treat employees with more than one job). A system where one part of the government pays the pension, which is followed by demand from another governemnt department to pay some of the money back doesn't make sense at all.

They could do something similar to the Savings Starter Rate to engineer a situation where if your only income is the State Pension, you don't pay tax on it, I suppose. 

TheBanker

Exodi said:

MK62 said:

True, but then does it really matter how a pensioner's income is made up, whether SP alone or SP+other pension...surely it's the total which matters.....the net effect of fiscal drag is that both might well be dragged into paying tax.

Anyone today on £8814pa (max BSP) and say £3700pa in "other" pensions (so £12514 total) is above the pension credit threshold, and so will lose WFA. In April, they will likely see their state pension rise with the triple lock (looks like being 4.5%) to £9211pa, and their other pension probably by CPI (maybe 2.2%) to £3782pa, for a total of £12993.....hello taxman, who will then relieve them of £85 in income tax........is this what the govt should be doing to older people of limited means?

Sorry I think you're missing the point. Your original point was that if someone was dragged into paying tax, then technically they were not receiving an increase of CPI, but less on account of tax. My response was you're framing this around someone that happens to be just under the threshold. For anyone over the threshold already, triple lock increases would have always had tax taken from them - this isn't a new thing. Just yet again more cherry-picked examples as has been rife with the winter fuel allowance.

So I'm not sure what the conclusion is - yes I think pensioners should not be exempt from paying tax? Sorry.

Plus, call me a big ol' meany but... £85 tax on £12,993?

Of course the Daily Mail will run with that and declare "WAR ON PENSIONERS" or "THEY'RE COMING FOR YOUR PENSIONS" and the easily influenced will swallow it up.

Speak of the devil...

FIREDreamer said:

MK62 said:

True, but then does it really matter how a pensioner's income is made up, whether SP alone or SP+other pension...surely it's the total which matters.....the net effect of fiscal drag is that both might well be dragged into paying tax.

Anyone today on £8814pa (max BSP) and say £3700pa in "other" pensions (so £12514 total) is above the pension credit threshold, and so will lose WFA. In April, they will likely see their state pension rise with the triple lock (looks like being 4.5%) to £9211pa, and their other pension probably by CPI (maybe 2.2%) to £3782pa, for a total of £12993.....hello taxman, who will then relieve them of £85 in income tax........is this what the govt should be doing to older people of limited means?

I think this government has already demonstrated its contempt for pensioners.

The only reason they hit pensioners first was because they wouldn't have been able to announce it during the budget and enact it this year. Pain is down the road for the rest of us at the end of next month.

This is what people forget. Pensioners would have been (rightly) outraged if they were told they were losing their WFA just as we head into the colder months, and there would have been no time for those eligible to apply for Pension Credit. They had to be told as soon as possible so they could plan.

I work, I pay into a pension, I drive a car, I own a home, I have investments. They are coming for me too, and I suspect I will be more than £200 worse off as a result. I will be outraged too, but I recognise that this is necessary because I want to live in a country with a functioning health service, a welfare system to protect the vulnerable, schools to educate our children (even though I do not have childred - I mean 'our' in the collective sense). 

There is no money. Country's broke. The music's stopped playing and the good times are over. 

Exodi

MK62 said:

Exodi said:

MK62 said:

True, but then does it really matter how a pensioner's income is made up, whether SP alone or SP+other pension...surely it's the total which matters.....the net effect of fiscal drag is that both might well be dragged into paying tax.

Anyone today on £8814pa (max BSP) and say £3700pa in "other" pensions (so £12514 total) is above the pension credit threshold, and so will lose WFA. In April, they will likely see their state pension rise with the triple lock (looks like being 4.5%) to £9211pa, and their other pension probably by CPI (maybe 2.2%) to £3782pa, for a total of £12993.....hello taxman, who will then relieve them of £85 in income tax........is this what the govt should be doing to older people of limited means?

Sorry I think you're missing the point. Your original point was that if someone was dragged into paying tax, then technically they were not receiving an increase of CPI, but less on account of tax. My response was you're framing this around someone that happens to be just under the threshold. For anyone over the threshold already, triple lock increases would have always had tax taken from them - this isn't a new thing. Just yet again more cherry-picked examples as has been rife with the winter fuel allowance.

Well firstly, as I was illustrating the point of someone just below the threshold being dragged into paying tax, it's hardly surprising that I used an example of .....someone just below the threshold.......

As for someone over the threshold, yes they are already paying tax (not sure what your point is there)......are you saying fiscal drag doesn't affect them? It's not paying tax on income above the threshold per se.....rather it's should that threshold ever have been frozen, and what effect that freeze is having. Those who are now above the threshold may have still been below it without this "fiscal drag" policy......if not for this policy, the PA would now be around £15200, and would have been set to increase to around £15500 in April 2025.

As for the WFA, over 10 million pensioners are set to lose it.......so who should we pick as a typical example of someone who might well suffer hardship as a result.......a pensioner with £50000pa income, or one with about £11500-£12500? Nobody is saying that well off pensioners don't exist.......or that such pensioners need the WFA.....or that they shouldn't pay tax......but, pensioners above the pension credit threshold are not ALL well off, far from it.

On the subject of the actual tax, £85 may not sound that much to you or I, but to an OAP living on c£13k pa, that might not be the case for them.......and it might be £85 next year, but how much the year after, and the year after that?

Do you suffer from short term memory loss? I directly responded to a comment you made and you seem to have completely forgotten about it and are now taking us all round the houses.

Your original comment was:

MK62 said:

I guess we'll have to wait and see what govt does here.......not going to look good giving pensioners a CPI rise and then taking some of that back as tax, leaving the net rise below CPI......which is why I don't think it will happen tbh......but who knows what the govt are thinking on this?

I hate to re-type my point, but it's clearly not landing. The notion that it was unreasonable because a CPI increase may push a pensioner into paying tax, then the net increase percentage would therefore be lower than CPI - this you outline as a problem "which is why I don't think it will happen".

I don't know how to say this without just repeating myself, but I pointed out that you are only focused on a pensioner with virtually no other income sources, no other DB/private pension, no annuity, etc. If you glanced outward for just a second at people that receive a few grand a year from any other source, they would have been paying tax on CPI increases every year regardless, thus if you wasn't so concentrated on the specific scenario of a poor pensioner, you'd realise it's not a new situation that is just about to happen - so why would there be any reason to treat it like one as you suggest? That was my point. You're free to use scenarios of destitute pensioners to challenge means-testing of the WFA or state pension increases/tax to your hearts content.

I think the implication from your posts is that you believe that pensioners whose only income source is the state pension should be exempt from tax but then you said above that "Nobody is saying that... they shouldn't pay tax'" so I'm not sure of your position? Were you suggesting the triple lock needs to be improved? Or are you just trying to forget that comment and make random points of debate over other points in my comment.

I'm not sure how to respond to your most recent post because a lot of it is you setting up a strawman "are you saying fiscal drag doesn't affect them [people paying tax]?" and then explaining what fiscal drag does...

Pensioners outraged about the means-testing of the WFA should not forget that increased energy bills have affected everyone, and they should also remember that fiscal drag affects everyone.

Regarding your final points on tax - unfortunately as we all know, if you earn more money, you pay more tax.

Again even in your example, I don't know if I'm a terrible human being but I still don't see the grand problem with £85 tax on £12,993 - you said earlier that nobody is saying that they shouldn't pay tax, but you clearly take issue with £85 on nearly £13k? If it's not zero but it's also not £85, how much would be acceptable to you?

0.6% effective tax rate isn't bad going...

sgx2000 said:

Surely this is financial stupidity.....

For someone on just the SP  to eventually pay a tiny amount of tax on the tiny amount over the 12k....
The cost to HMRC to get this tiny amount just doesnt seem sensible....

Surely the base rate has to be at what the SP is?
Yes I know this would then carry forward to the tax for the working population.....

Perhaps a simpler solution would be a law change, that whatever the SP is.. it will not be taxed...(even if over base rate) i.e. a new tax band for pensions...

It might seem a contradiction but I don't necessarily disagree with this.

Not because I have some sort of moral belief that pensioners should be exempt from tax, but because the admin cost behind collecting a trivial amount of tax through a separate department is unlikely to be economical.

I can't comment on the rest of the comment about permanent reforms; I have no idea what Labour will want to do with the TFA in 2026 when the current freeze expires, I doubt they'll be keen to raise it by very much.

Dazed_and_C0nfused

Exodi said:

MK62 said:

Exodi said:

MK62 said:

True, but then does it really matter how a pensioner's income is made up, whether SP alone or SP+other pension...surely it's the total which matters.....the net effect of fiscal drag is that both might well be dragged into paying tax.

Anyone today on £8814pa (max BSP) and say £3700pa in "other" pensions (so £12514 total) is above the pension credit threshold, and so will lose WFA. In April, they will likely see their state pension rise with the triple lock (looks like being 4.5%) to £9211pa, and their other pension probably by CPI (maybe 2.2%) to £3782pa, for a total of £12993.....hello taxman, who will then relieve them of £85 in income tax........is this what the govt should be doing to older people of limited means?

Sorry I think you're missing the point. Your original point was that if someone was dragged into paying tax, then technically they were not receiving an increase of CPI, but less on account of tax. My response was you're framing this around someone that happens to be just under the threshold. For anyone over the threshold already, triple lock increases would have always had tax taken from them - this isn't a new thing. Just yet again more cherry-picked examples as has been rife with the winter fuel allowance.

Well firstly, as I was illustrating the point of someone just below the threshold being dragged into paying tax, it's hardly surprising that I used an example of .....someone just below the threshold.......

As for someone over the threshold, yes they are already paying tax (not sure what your point is there)......are you saying fiscal drag doesn't affect them? It's not paying tax on income above the threshold per se.....rather it's should that threshold ever have been frozen, and what effect that freeze is having. Those who are now above the threshold may have still been below it without this "fiscal drag" policy......if not for this policy, the PA would now be around £15200, and would have been set to increase to around £15500 in April 2025.

As for the WFA, over 10 million pensioners are set to lose it.......so who should we pick as a typical example of someone who might well suffer hardship as a result.......a pensioner with £50000pa income, or one with about £11500-£12500? Nobody is saying that well off pensioners don't exist.......or that such pensioners need the WFA.....or that they shouldn't pay tax......but, pensioners above the pension credit threshold are not ALL well off, far from it.

On the subject of the actual tax, £85 may not sound that much to you or I, but to an OAP living on c£13k pa, that might not be the case for them.......and it might be £85 next year, but how much the year after, and the year after that?

Do you suffer from short term memory loss? I directly responded to a comment you made and you seem to have completely forgotten about it and are now taking us all round the houses.

Your original comment was:

MK62 said:

I guess we'll have to wait and see what govt does here.......not going to look good giving pensioners a CPI rise and then taking some of that back as tax, leaving the net rise below CPI......which is why I don't think it will happen tbh......but who knows what the govt are thinking on this?

I hate to re-type my point, but it's clearly not landing. The notion that it was unfair that that because a CPI increase may push a pensioner into paying tax, then the net increase percentage would therefore be lower than CPI - this you outline as a problem "which is why I don't think it will happen".

I don't know how to say this without just repeating myself, but I pointed out that you are only focused on a pensioner with virtually no other income sources, no other DB/private pension, no annuity, etc. If you glanced outward for just a second at people that receive a few grand a year from any other source, they would have been paying tax on CPI increases every year regardless, thus if you wasn't so concentrated on the specific scenario of a poor pensioner, you'd realise it's not a new situation that is just about to happen - so why would there be any reason to treat it like one as you suggest?

I think the implication from your posts is that you believe that pensioners whose only income source is the state pension should be exempt from tax but then you said above that "Nobody is saying that... they shouldn't pay tax'" so I don't think so? Were you suggesting the triple lock needs to be improved? Or are you just going to forget your previous comment above, and continue responding to me with emotionally charged points with cherry picked examples?

I'm not sure how to respond to your most recent post because a lot of it is you setting up a strawman "are you saying fiscal drag doesn't affect them [people paying tax]?" and then explaining what fiscal drag is...

Pensioners outraged about the means-testing of the WFA should not forget that increased energy bills have affected everyone, and they should also remember that fiscal drag affects everyone.

Regarding your final points on tax - unfortunately as we all know, if you earn more money, you pay more tax.

Again even in your example, I don't know if I'm a terrible human being but I still don't see the grand problem with £85 tax on £12,993 - you said earlier that nobody is saying that they shouldn't pay tax, but you clearly take issue with £85 on nearly £13k? If it's not zero but it's also not £85, how much would be acceptable to you?

0.6% effective tax rate isn't bad going...

sgx2000 said:

Surely this is financial stupidity.....

For someone on just the SP  to eventually pay a tiny amount of tax on the tiny amount over the 12k....
The cost to HMRC to get this tiny amount just doesnt seem sensible....

Surely the base rate has to be at what the SP is?
Yes I know this would then carry forward to the tax for the working population.....

Perhaps a simpler solution would be a law change, that whatever the SP is.. it will not be taxed...(even if over base rate) i.e. a new tax band for pensions...

It might seem a contradiction but I don't necessarily disagree with this.

Not because I have some sort of moral belief that pensioners should be exempt from tax, but because the admin cost behind collecting a trivial amount of tax is unlikely to be economical.

I can't comment on the rest of the comment about permanent reforms; I have no idea what Labour will want to do with the TFA in 2026 when the current freeze expires, I doubt they'll be keen to raise it by very much.

Although this isn't a new issue for HMRC, they came up with a system to cope with this specific scenario (and one or two others) nearly 10 years ago now so fiscal drag is just adding some new people into an existing process they operate.

The first year it impacts people will have scope for extra work as people won't necessarily understand what's happening and might need some help/explanation from HMRC.

But an employee earning £12,993 would have to pay £78 - £83 in tax via PAYE during the tax year so I personally don't see the issue with a pensioner paying £80 - £85 in tax direct to HMRC months after the end of the tax year. 

And, in my opinion, these people should still be getting the Winter Fuel Allowance.

I guess DWP operating PAYE on State Pension would probably be better in the long run but as with the current thread on changing State Pension payments to monthly the cost to implement that would no doubt be horrendous.