A state pensioner pleased to see her payments increase this April was shocked to be informed she would be paying tax for the first time.
Frozen income tax rates mean Susan Bruce, 76, from Portsmouth, will be paying tax for the first time since she started claiming her state pension when she was 60.
She was shocked when she received a letter about her tax code and her daughter later explained it was because her personal allowance was not enough to cover her income with the payment increase.
She told GB News: “I was speaking to my friend who is 90 and he said he’s received a tax code. His is exactly the same.
“Because they are not putting up the personal allowance, they are giving it to us with one hand and taking it away with the other.”
The personal allowance has been frozen at £12,570 a year. The full new state pension has increased this month to £221.20 a week, or £10,500.40 a year, which is just £2,000 away from being subject to income tax.
Chancellor Jeremy Hunt announced in the Spring Budget another 2p cut to National Insurance but he left income tax rules as they are, meaning there were no tax cuts for pensioners.
State pension payments have increased 8.5 percent from this month, with the full basic state pension increasing from £156.20 a week to £169.50 a week.
Research from Phoenix Insights recently found at least half of adults expect to work up to at least their state pension age.
Patrick Thomson, head of Research and Policy at Phoenix Insights, said: “The state pension matters to all of us, it is an important intergeneration social contract helping to reduce poverty among retirees, paid for from contributions of the working age population.
“It is the biggest single part of the social security system and has been the foundation for many people’s retirement income for over 75 years.
“However, Phoenix Insights’ research exploring public attitudes towards the state pension found that understanding of the system is very low, including around what the ‘triple lock’ is and when people can access their state pension.”
The triple lock determines the state pension increase each year, with payments increasing in line with the highest of 2.5 percent, the rise in average earnings or inflation.
Mr Thomson said: “A common misconception among the public was that National Insurance contributions are kept in a personal pot and accessed at state pension age rather than the state pension being paid for out of general taxation.
“As an increasing proportion of the population reaches state pension age in the coming decades, it is important that the system is trusted, sustainable, understandable and supports the financial security of retirees.”
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