by Around 12.7 million people over State Pension age will find out how much their regular payments will increase in April, two weeks before Chancellor Rachel Reeves confirms the annual upgrade during the Autumn Budget in Parliament on 30 October. The Labor Government has pledged to uphold the Triple Lock, and the final part of this policy is due to be published by the Office for National Statistics (ONS) on Wednesday, 16 October.
The New and Basic State Pensions are increased each year under the Triple Lock, in line with whichever is higher between the average annual earnings growth from May to July (4%), the Consumer Price Index (CPI) inflation rate for the year to September , or 2.5 percent. Additional elements of the State Pension and deferred State Pension are increased each year with the September CPI figure.
The August CPI figure was 2.2 percent, while earnings growth was 4.0 percent. Pension experts are now suggesting that the CPI is very likely to exceed the earnings growth rate, meaning that the latter rate will be used to calculate the State Pension upgrade for 2025/26.
Based on the latest earnings growth figure, those on the full New State Pension could see a weekly increase of £8.85, from £221.20 to £230.05. As payments are normally made every four weeks, this represents an increase of £920.20.
Annual payments would rise by £460, from £11,502 to £11,962, over the 2025/25 financial year, the Daily Record reports.
Pensioners on the full Basic State Pension could see an increase of £6.80 per week from £169.50 to £176.30, which equates to a lump sum of £705.20 over each four-week period.
The amount a person receives in the State Pension is determined by the amount of National Insurance contributions they have made during their working life. A minimum of 10 qualifying years is required to receive any State Pension, and a full New State Pension usually requires around 35, although this may be more for those who have been contracted out.
Mike Ambery, Director of Retirement Savings at Standard Life which is part of the Phoenix Group, recalled the implications of the recent CPI figures for pensioners: “Unless an unexpected price shock , we are unlikely to see a case. when the inflation trigger other than 4 per cent average earnings determines the Third Green, it is worth noting, however, that as inflation falls above the Bank of England’s 2 per cent target, it will erode the real impact of next year’s boom on pensioners.”
In the context of the current rate increases, he said, “With price increases around the 2.2 percent mark, the real boost for pensioners will be 1.8 percent – with inflation at target, they would be 2 percent more better off.”
In addition, Ambery highlighted potential future issues: “This winter’s price increases are likely to be largely driven by rising energy costs. in 2025 they could further erode the Triple Lock reinforcement.”
“Retirees on lower incomes and those who are most dependent on the State Pension for income are likely to be most affected by this – we would advise anyone of State Pension age and on a low income to check their eligibility for Credit Check pensions using the government’s online Pension Credit. calculator.”
Upgraded projections of the State Pension
The calculations below are based on the latest ONS figures using earnings growth of 4.0 per cent as the multiplier.
New Total State Pension
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Weekly payment: £230.05 (from £221.20)
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Four weeks’ payment: £920.20 (from £884.80)
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Annual amount: £11,962 (from £11,502)
Full Basic State Pension
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Weekly payment: £176.30 (from £169.50)
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Four weeks’ payment: £705.20 (from £678)
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Annual amount: £9,167 (from £6,814)
State Pension and Personal Tax Allowance
The Personal Allowance will remain frozen at £12,570 until 2028. Around 8.1m (64%) older people are currently paying tax in retirement, mainly due to extra income from work or private pensions on top of their State Pension.
Retirement experts at Spencer Churchill predict that almost 900,000 more people will exceed the Personal Allowance threshold of £12,570 in the current financial year.
It is important to know that older people whose only income is the State Pension will not pay tax this year, and anyone with additional income that is not paid directly by HM Revenue and Customs (HMRC) through earnings, he won’t get a tax bill until June. or July 2025, which must be paid by the end of January 2026.
This year, the total New State Pension stands at £11,502, leaving a margin of £1,068 before pensioners exceed the personal tax threshold. Therefore, people with extra monthly income over £89 over their State Pension could face a tax bill the following year.
If you get the full amount of the Basic State Pension, it means pocketing £8,814 a year, which puts pensioners £3,756 below the personal tax threshold which equates to an extra monthly income of £313.
Retirement specialist Adam Pope has expressed particular concern, saying: “It is a concern that freezing the income tax thresholds would seriously affect their financial situation. Paying more tax.”
Highlighting the specific struggle for those who depend on the State Pension, he noted: “This is particularly difficult for those who live mainly on the State Pension. With no change to the tax thresholds, they may end up owing more tax than expected. difficult if they don’t have much to start with.”
The Pope offered his insights on future implications: “As the amount of the State Pension goes up, more pensioners may have to pay more tax, which would make life more difficult for those who already struggling. Over 60 per cent of pensioners are paying income tax, up from around 50 per cent in 2010.”
In addition, the Pope said the possible consequences for disposable income: “Furthermore, if the income tax thresholds are kept the same pensioners could have less money to spend. greatly affect their living standards and financial security.”
