About 12.7 million people over state pension age will find out how much their regular payments will rise in April, two weeks before Chancellor Rachel Reeves confirms the annual increase during the autumn budget in Parliament on October 30. The Labor government has pledged to enforce the law. Triple Lock, and the final part of this policy will be published by the Office for National Statistics (ONS) on Wednesday 16 October.
New and basic state pensions rise annually under the Triple Lock, in line with the highest between average annual earnings growth from May to July (4%), the consumer price index (CPI) for the year to September, or 2.5 percent. Additional state pension elements and deferred state pensions increase every year with the September CPI figure.
The August CPI figure was 2.2 percent, while earnings growth was 4.0 percent. Pension experts now suggest that the CPI is highly unlikely to exceed the earnings growth rate, meaning the latter will be used to calculate the state pension increase for 2025/2026.
Based on the latest earnings growth figure, those on a full New State Pension could see a weekly increase of £8.85, from £221.20 to £230.05. Since payments are typically made every four weeks, this amounts to an increase of €920.20.
This would result in an increase in annual payments of £460, from £11,502 to £11,962, over the 2025/25 financial year, the Daily Record reports.
Pensioners on a full basic pension could see their weekly income increase by £6.80 per week, from £169.50 to £176.30, which equates to an increase of £705.20 over each four-week period.
How much someone receives in state pension is determined by the amount of national insurance contributions he or she has paid during his or her working life. At least ten qualifying years are required to receive a state pension, while a completely new state pension typically requires around 35 years, although this may be more for those who have taken out a contract.
Mike Ambery, director of retirement savings at Standard Life, part of Phoenix Group, commented on the implications of the recent CPI figures for pensioners: “Unless an unexpected shock pushes price rises significantly higher than forecast, it is unlikely that a situation will Although inflation, rather than the average profit of 4 percent, ultimately determines the Triple Lock, it is worth noting, however, that as inflation moves further above the Bank of England’s 2 percent target, this will impact of next year’s boost for pensioners will erode.’
In the context of the current rate hikes, he added: “With price increases around 2.2 percent, the real boost for pensioners will be 1.8 percent – if inflation remains at target levels, they would be 2 percent better off. ”
In addition, Ambery highlighted possible future problems: “This winter’s price increases are likely to be strongly driven by rising energy costs. Next year, like this year, there will no longer be a universal winter fuel payment, and so if energy prices follow the same pattern in 2025 they could further erode the Triple Lock boost.”
“Pensioners on lower incomes who are most reliant on the state pension for their income are likely to be most impacted by this – we would urge anyone who is of state pension age and on a low income to check their eligibility for pension credit via the government’s online pension credit. calculator.”
Predictions for increasing state pensions
The calculations below are based on the latest ONS figures, using earnings growth of 4.0 percent as a multiplier.
Completely new state pension
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Weekly payment: £230.05 (from £221.20)
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Four-weekly payment: £920.20 (from £884.80)
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Annual amount: £11,962 (was £11,502)
Full basic state pension
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Weekly payment: £176.30 (from £169.50)
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Four-weekly payment: £705.20 (from £678)
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Annual amount: £9,167 (was £6,814)
State pension and personal tax deductions
The personal allowance will remain frozen at £12,570 until 2028. About 8.1 million (64%) older people currently pay taxes in retirement, largely due to extra income from work or private pensions on top of their state pension.
Pensions experts at Spencer Churchill predict that almost 900,000 more people will pass the £12,570 personal allowance threshold in the current financial year.
It is important to note that older people whose only income this year is the state pension will not pay tax, and anyone with additional income who does not pay HM Revenue and Customs (HMRC) directly through income will not be hit with a tax bill until June received. or July 2025, which must be paid by the end of January 2026.
This year the full new state pension is £11,502, leaving a margin of just £1,068 before pensioners exceed the personal tax threshold. Therefore, those with an additional monthly income of more than £89 above their state pension could face a tax bill the following year.
Receiving the full amount of the basic state pension means pocketing £8,814 annually, putting pensioners £3,756 below the personal tax threshold, equivalent to an extra monthly income of £313.
Pensions specialist Adam Pope has raised concerns, saying: “Freezing income tax thresholds for pensioners is worrying and could seriously impact their financial situation. Nearly two million retirees are expected to be affected by this over the next four years, meaning many of them will have to do this.” pay more taxes.”
Highlighting the specific struggle for those dependent on the state pension, he noted: “This is especially difficult for those who live mainly on the state pension. Without a change in tax thresholds, they could end up owing more tax than they expected, making the situation difficult if they don’t have much to start with.”
Pope added his insights regarding the future implications: “As the amount of the state pension increases, more retirees would have to pay more taxes, making life harder for those who are already struggling. More than 60 percent of retirees pay income taxes, at about 50 per year. cents in 2010.”
Additionally, Pope noted of the potential impact on disposable income: “Additionally, keeping income tax thresholds the same could mean retirees have less money to spend. By 2027/2028 the average taxpaying pensioner could be £1,000 worse off, which will really impact on their living standards and financial security.”