POLL: Should pensioners have a higher personal tax allowance than workers?
Plans have been put forward for the personal allowance to go up each year for pensioners.
State pensioners could get a tax break worth up to £300 by the end of the decade, under a policy announced by the Conservatives.
If re-elected to Government, the Tories plan to increase the personal allowance for those of state pension age in line with the triple lock metric.
The policy has been dubbed 'triple lock plus' and could save pensioners almost £300 by the end of this decade.
The question of how to twek tax allowances for pensioners is a pressing issue, as the full new state pension of £221.20 a week is now only £1,000 a year away from being subject to income tax.
Julian Jessop, economics fellow at the Institute of Economic Affairs, said it was a "big plus" of the policy that "poorer retirees living just on the state pension won't pay income tax".
But he also warned there are some drawbacks with the policy, saying: " All pensioners will benefit, even the wealthiest; favours pensioners over younger people; further complicates the tax system; doubles down on the 'triple lock' itself (which many economists believe is unsustainable)."
The personal allowance is currently £12,570 a year, after which a person pays income tax at the basic rate of 20 percent.
Kirsty Anderson, retirement specialist at Quilter, urged that there will need to be action on the personal allowance regardless of the outcome of the General Election.
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She said: "Our previous analysis found that pensioners could need to pay back a proportion of their state pension in income tax in just two years' time.
"Simply from an administrative point of view this would prove difficult for HMRC so it seems unlikely if Labour were to get in, they would not be forced to act in some way.
"Frozen thresholds continue to raise tax revenues through the backdoor due to fiscal drag. Unless thresholds are changed meaningfully the whole nation will suffer an ever-bigger tax burden."
Ms Anderson also warned raising the personal allowance solely for pensioners could be deemed an unfair policy.
She explained: "Increasing the personal allowance just for pensioners may be popular with pensioners but the rest of the tax paying public may feel that separate more beneficial rules for pensioners further increases intergenerational inequality."
Do you think there should be a different personal allowance for pensioners? Vote in our poll or share your thoughts in the comments.
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