Pensioners Gain £1,000 On Average From Policy Changes Since 2010, With Tax Rises This Parliament Offset By Triple Lock Boost For All But The Richest Pensioners

14th March 2024

Taxpaying pensioners did not gain anything from the Chancellor's Budget last week, and will see their taxes go up due to Income Tax threshold freezes announced earlier in this parliament, prompting accusations that the government has neglected older generations ahead of the next election. But new Resolution Foundation analysis published today (Tuesday) reveals that pensioners as a whole have gained significantly from policies announced since 2010, such as the introduction of the Triple Lock.

The analysis finds that policies announced since 2019, including the six-year freeze to tax thresholds, will cause pensioners to lose an average of £900 a year. Pensioners in the richest fifth of the population will lose £3,100 on average, largely due to threshold freezes to the Personal Tax Allowance (PTA), Higher Rate Threshold, reductions in the Additional Rate Threshold and increases to Dividend Tax. In contrast, pensioners in the poorest fifth are set to gain £170 on average as boosts to means-tested benefit support more than offset losses from tax rises.

However, recent tax rises need to be seen in the longer term context of policy largely favouring pensioners since 2010. Taking a rounded view of all tax and benefit policies announced since then - most importantly the introduction of the Triple Lock and the New State Pension - shows that pensioners are actually £1,000 better off on average.

Looking over this longer period, the analysis finds that the biggest cash gains accrue to middle-income pensioner households - who are set to gain £1,400 on average. Pensioners in the poorest fifth are set to gain £560 on average, and only those in the richest five percent are set to lose overall, by £1,800 on average.

Finally, the Foundation notes that these longer term changes, the fact that pensioners already pay lower rates of tax due to their exemption from National Insurance, and the fact that pensioners today are less likely to be in poverty than the rest of society, mean that the Chancellor was right to focus tax cuts towards working-age families in the Budget.

Torsten Bell, Chief Executive of the Resolution Foundation, said, "The Budget last week marked a major turning point in recent British politics, with the Chancellor's tax cuts focused on working-age rather than pensioner households. With pensioners still facing tax rises announced earlier in this parliament, this has led some to accuse the Conservatives of betraying older generations.

"The truth though is that pensioners have gained rather than lost from decisions taken by governments since 2010. Increases to the generosity of the state pension have far outweighed the losses from more recently announced tax rises, by £1,000 on average. Only the richest pensioners are worse off overall.

"This broader context shows why the Chancellor is right to have focused tax cuts on working-age families. Whether those tax cuts are affordable is another matter entirely."

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