We need a rethink on pensions and tax

JESSICA BEARD’S main article in Money Mail last week highlighted the ludicrous situation that, as things stand, many pensioners will soon find themselves having to pay tax on their pension income.

This will significantly offset the ‘generosity’ of the triple lock and result in the Government giving with one hand and taking with the other. It is bad enough that those of us with any form of private pension will have to pay more tax. At least for us, though, in terms of administration this simply means our tax codes for the private pension will be adjusted to collect any extra tax due.

But as Money Mail pointed out, there is currently no mechanism for HMRC to deduct tax at source from state pension payments.

This means those who receive only the state pension will get their money without deduction and HMRC will then have to claw back any tax due (because it is a more generous earnings-related pension, or because of income from other sources) by issuing notices to pensioners, with all the additional administration this will entail, plus the possibility of individuals being fined for nonpayment. The cost of this additional administration and enforcement will surely be prohibitive and, given how generally incompetent HMRC seems to be, fraught with potential for errors and mishandling.

Surely someone in Government is looking at options to avoid this turmoil? At the very least, plans should be in place to update systems so tax can be deducted at source for those who receive only the state pension, thus avoiding the costly and wasteful nonsense of paying out with one hand, then laboriously collecting tax due at a later date.

I would like to suggest two other possible solutions. Ideally, the basic rate threshold should be increased so it is always slightly higher than the full state pension amount. This would ensure that no one is taxed on their state pension. Alternatively, perhaps such an automatic increase could be considered only for those of pension age. After all, the recent decreases in National Insurance applied only to those working, so surely it would not be wrong to introduce a change that applied only to pensioners.

I, for one, would be willing to pledge my vote at the forthcoming General Election to any political party committed to ensuring that pensioners are not treated unfairly. ANDY TRISTRAM, Doncaster, S. Yorks.

I FULLY agree with Ros Altmann (Mail) about the cynical changes that affect pensioners in regard to tax. If the Government does not raise the income tax and pension credit thresholds, pensioners will make their views known at the election. ElAINE IfflAND, Bristol.