State pension rise ‘should not be funded by tax raid’

PHILIP HAMMOND has been warned he must not use a hike in the state pension for millions of people as an “excuse” for a raid on retirement savings in his Budget next month.

From April next year the state pension will rise by 3per cent, equivalent to £250 per person, after inflation reached the highest level for five years.

Under the Government’s “triple lock” the state pension rises in line with average earnings, inflation or 2.5per cent, whichever is higher.

Official inflation figures published yesterday showed that prices in September rose by 3per cent, forcing the Government to raise the state pension at an estimated cost of £500million.

Public-sector pensions, such as those paid to teachers, police and NHS staff, will also rise in line.

There are now growing concerns that Mr Hammond is preparing to reduce the annual allowance, the amount that workers can put into their pension pots before being hit by the top rate of income tax, in the Budget on Nov 22. The allowance currently stands at £40,000 after being repeatedly cut by the Tories, but pensions experts fear it could be cut further to £30,000.

Tom Mcphail, the head of pensions research at Hargreaves Lansdown, said: “Inflation can often be bad news for pensioners and pension savers as it can erode their savings, but the CPI number will produce a relatively generous increase to both private pension savings and to the state pension.

“Our only hope now is that the Chancellor doesn’t look on this as an excuse to raid pensions taxation again in the Budget.”

Mr Hammond is said to be planning a Budget raid on older workers to pay for tax breaks for younger people.