Despite the increase being worth an extra £900 per year for people on the full new state pension, pensioners will only be £20 better off than they are now, the Resolution Foundation said.
Under the triple lock, retirees are set to be £190 better off from Monday, after adjusting for higher prices, the think tank said.
However, their research has found that due to frozen tax allowances, retirees will only see a £20 difference in real terms.
Jeremy Hunt announced a six year freeze in income tax thresholds, creating a ‘fiscal drag’ as it is not rising with the rate of inflation or wages.
Although the state pension is rising by 8.5 per cent, the frozen tax threshold will cost pensioners £170 – meaning they stand to gain just £20 overall.
The Resolution Foundation said: “A basic-rate tax paying pensioner will essentially see their above-inflation state pension rise wiped by this April’s personal allowance freeze.”
Although the state pension is rising by 8.5 per cent, the frozen tax threshold will cost pensioners £170
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The Foundation found that a parent earning £60,000 was in line for a net tax cut of £900 because of reductions in National Insurance (NI).
Even with the cuts to NI, the think tank highlighted that eight million pensioners will face a £1,000 hit from Mr Hunt’s stealth tax raid since pensioners don’t pay National Insurance.
Analysts also highlighted that UK taxpayers faced the highest council tax bills on record.
They said: “At the same time as NI rates are falling, council tax is continuing its upwards march.
“Council tax will be going up in England and Wales, with average increases of 5.1 per cent and 7.7 per cent.
“This tax is now heading to a joint record high (ignoring the pandemic) in the coming years – reaching 1.7 per cent of GDP in 2024-25, and projected to hit 1.8 per cent in the next parliament.
“This is not a great trajectory for Britain’s worst-designed tax, which is both regressive and hopelessly out of date as it is based on property valuations 33 years ago.”
State pension triple lock
From Monday April 1, the state pension will rise by 8.5 per cent.
The full new state pension will rise by around £900 per year, while the full basic state pension will increase by £691 per year.
The rise in state pension means that those qualifying for a full new state pension will now receive £221.20 a week (up from £203.85).
Those who reached state pension age before April 2016, who are on the older basic state pension, and are entitled to the full amount, will receive £169.50 per week – up from £156.20.
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Prime Minister Rishi Sunak has confirmed the Conservative party will keep the triple lock for the whole of the next Parliament, insisting that the promise is affordable.
The triple lock guarantees that the state pension will rise by the highest out of the rate of inflation, earnings growth, or 2.5 per cent every year.
Asked if the triple lock would be kept for the whole of the next parliament if the Conservative Party wins the election, the Prime Minister told the Liaison Committee: “I think you can safely assume that is what he [Hunt] meant, without wanting to write the entire manifesto now.”
Robert Johnson is a UK-based business writer specializing in finance and entrepreneurship. With an eye for market trends and a keen interest in the corporate world, he offers readers valuable insights into business developments.
