Following last week’s Autumn statement we received a number of questions from members to focused mainly on personal tax thresholds, the impact for those on the old vs new pension and whether the Civil Service pension will be increased. We’ve pulled together answers and information, which we hope gives some help and clarification.
1. Personal Tax Thresholds frozen
The basic rate at which income tax is payable was frozen from April 2021 at £12,570 and will remain frozen until 2028, as confirmed in the Chancellor’s Autumn Statement. This has resulted in many more pensioners being dragged into the 20% tax bracket, especially after the 10.1% increase in State Pensions and Civil Service pensions from April 2023 which resulted in 770,000 more over 65`s paying tax on part of their State Pension according to HMRC, with 8.5 million over 65`s now paying income tax, compared to 4.5 million in 2010 according to HMRC. The numbers will increase further after the confirmed 8.5% increase in both the basic and new State Pension from April 2024; and 6.7% increase in Civil Service pensions. CSPA, has been lobbying with our partners in other pensioner organisation, for the freeze to be lifted and tax thresholds uprated annually in line with CPI inflation.
2. Old v New State Pension
The “new” State Pension was introduced from 6 April 2016 for those reaching State Pension age after that date (at differing rates according to an individual’s National Insurance contributions) and is updated annually by the triple-lock. Currently the full rate is £203.85 per week. For those who reached SP age before April 2016 the old, or “basic”, rate of State Pension applies, currently £156.20 per week. Although there is a wide gap of £47.65 per week between the two rates, previously many pre-2016 pensioners also received the 2nd State Pension (formerly known as SERPS) based on their earnings and NI record. The legacy 2nd State Pension is not covered by the triple-lock and is only uprated by CPI inflation, rather than earnings. CSPA has campaigned for a closer alignment of the basic and new State Pension rates.
3. What is the increase for Civil Service pensions?
All public service pensions, including Civil Service pensions, have since 2011 been index-linked to annual inflation based on the Consumer Prices Index (CPI) as at the preceding September. (Prior to 2011 the increase was based on the Retail Prices Index (RPI)). The increase from 8 April 2024 will be 6.7% based on the ONS announcement on 18 October 2023 of the September annual movement in the CPI. The full increase only applies to pensions that have been in payment for a full year to 8 April, and paid pro-rata for pensions in payment for less than a year, based on 1/12th of 6.7% for each month in payment.
