Warning that next year's State Pension increase could 'see millions more retirees' forced to pay income tax

The UK government's long-standing guarantee on State Pensions could have unintented consequences for millions of pensioners, finance experts have warned. The so-called Triple Lock, which ensures that the State Pension increases in line with either consumer inflation, earnings, or 2.5 per cent, has been a measure used by governments to ensure.pensions rise in line with living costs. Both the Conservative and Labour parties have committed to honoring this guarantee until the end of the decade.

Mel Stride MP, the Secretary of State for Work and Pensions, has stated that the Triple Lock will likely be included in the Conservative Party manifesto for the next general election. Stride emphasised the importance of supporting pensioners who cannot increase their income through work. This year, the Basic and New State Pension saw a significant increase of 10.1%.

However, experts are warning that the Triple Lock agreement could see a huge spike in the number of peole paying tax, as inflation and interest rates rocket. According to the Bank of England's latest forecast, the CPI inflation rate is projected to be 7 per cent. If this forecast holds true, the Daily Record reports, it could result in more pensioners over State Pension age being subject to income tax.

Financial experts at wealth management firm Evelyn Partners have analysed the annual income tax statistics from HM Revenue and Customs (HMRC) and estimate that in the 2023/24 financial year, the number of people over State Pension age paying income tax will increase by 25% compared to the previous year. This means that 8.1 million pensioners will be paying income tax, up from 6.47 million in 2020/21.

Gary Smith, a partner in financial planning at Evelyn Partners, warns of a