The State Pension is on track for a hefty 4.7% rise next April, thanks to the triple lock guarantee. This annual increase follows the highest of three measures: wage growth, inflation, or a 2.5% minimum.
Wage Growth Leads the Pack
New figures from the Office for National Statistics reveal total wage growth, including bonuses, hit 4.7% for the quarter to July — edging up from 4.6% in the previous quarter.
With inflation currently at 3.8% and expected to stay below wage growth, experts say the wage increase will dictate the State Pension rise. September inflation data, out in October, will confirm the final figure.
Pensioners Face New Tax Threshold Worries
The anticipated boost will push the full new State Pension close to the HMRC personal allowance limit. This means many pensioners could start paying income tax on their pension for the first time unless tax rules change.
“The standard rate of the new state pension is creeping ever closer to the frozen personal tax allowance,” warns former pensions minister Steve Webb. “Someone relying solely on the new state pension will be a taxpayer by April 2027.”
“Nearly three quarters of pensioners already pay income tax, and rising pensions combined with frozen tax thresholds will drag more into the tax net.”
How Much Will Pensioners Gain?
While the exact rise isn’t confirmed—wage data is still subject to revision—Hargreaves Lansdown estimates a 4.7% increase would lift the full new State Pension from £230.25 to £241.05 per week from April.
Basic State Pension recipients would see an increase from £176.45 to £184.75 weekly.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, adds: “The 4.7% uplift takes the annual state pension to around £12,535 – just under the basic rate tax threshold. That’s a worrying spot for many pensioners.”
“This rise will also pile more pressure on the Government’s already swollen state pension bill.”
The Government insists the triple lock will stay for this Parliament. But with a state pension age review underway, changes—like raising the pension age into the late 60s—could be looming down the line.
Originally published on UKNIP