Millions of pensions are worried Labour could be coming after them after the Prime Minister and Chancellor warned of a “painful” budget. They claimed it’s needed to fix a £22billion “black hole” in the nation’s finances.
Both the PM and Chancellor Rachel Reeves have made it clear they won’t shy away from making difficult decisions and according to some reports this could mean slashing the country’s state pension bill.
Ms Reeves has already faced stiff criticism after cutting the number of pensioners who can receive winter fuel payments, and it’s feared with her party’s promise not raise income tax, VAT or National Insurance, she will now come after older people again for their pension payments.
Under current rules everyone aged 66 receives £11,502 a year as long as they have paid 35 years worth of National Insurance contributions. The national state pension bills cost the treasury around £124 billion this financial year.
According to the Telegraph the state pension could become unaffordable and experts warned the Chancellor may come after the amount pensions are entitled to without being taxed.
Under the complex rules of the current pensions system the newspaer says an estimated 2.5 million receive a state pension that exceeds the tax-free allowance. And many retirees who recieve a state pension plus a private pension, also pay tax on their income.
Steve Webb, a former pensions minister, now a partner at pensions consultancy LCP, said a long-term freeze in the tax-free allowance at a time of high inflation had dragged millions of pensioners into the tax net.
He added: “This policy was expected to end soon, but there must be a chance that a cash-strapped Chancellor will go on with the freeze even longer.
“The very nature of the tax system is slowly changing from being one where a minority of pensioners paid tax at all to one where paying tax in retirement is set to become the norm.”
Former chancellor Jeremy Hunt said Labour could hit pensions with what he called a new “retirement tax” next year, with figures suggesting 400,000 could be affected.
In some good news Labour have so far ruled out scrapping the so-called triple-lock on pensions, by which the state pension goes up each year by either 2.5 percent, inflation or average earnings
Some 10 million pensioners are expected to lose out on winter fuel payments as a result of Chancellor Rachel Reeves cutting the universal benefit.
And has been growing unrest in Labour ranks about the move’s impact on pensioners just above the poverty line who will not be eligible for the payment under the new criteria.
Speaking to the BBC‘s Newsnight Rachael Maskell, the York Central MP, appealed to the Chancellor to make concessions.
Asked if she could vote for the measure when it is put before the Commons next week, she replied: “I couldn’t vote for this, but I think what we are saying, this is bigger than a vote because this is about protecting people’s lives and ultimately that is our responsibility as MPs, to speak to truth to power.”
