UK Pensioners Face Potential Stealth Tax From Triple Lock

Investment platform IG warns that millions of UK pensioners may face substantial income tax bills over the next decade. This financial pressure stems from a gap between the Triple Lock pension increases and the frozen Personal Allowance threshold of £12,570.

Aaron Bright, an analyst at IG, describes the trend as a "retirement stealth tax," arguing that inflation-linked increases intended to protect living standards are instead being eroded by taxation. Projections suggest the full new State Pension could exceed the tax-free limit by the 2027/28 tax year. Based on an assumed average annual pension increase of 2.5%, the pension could reach £20,561 by 2046, potentially leaving nearly £8,000 subject to tax and resulting in annual bills of approximately £1,598.

Bright notes that the government now faces a choice between accepting that more pension income becomes taxable, making ad hoc changes to prevent it, or reviewing the long-term operation of the Triple Lock system.