The new state pension will rise from £230.25 to over £240 a week from April, as the government has confirmed a pay rise for retirees due to its so-called ‘triple lock’ policy. The increase means the full state pension only remains below the income tax threshold by the narrowest of margins and will have to breach it in 2027. Some are now asking the government to be clear with state pensioners about what is to come. 

The increase confirmed on Sunday amounts to an extra £550 a year for the full new state pension as pensioners will get an above-inflation increase of 4.8%, bringing the annual amount  to £12,547 from from currently £11,973. The basic state pension will go up by about £440.  

Chancellor Rachel Reeves said: “Whether it’s our commitment to the triple lock or to rebuilding our NHS to cut waiting lists, we’re supporting pensioners to give them the security in retirement they deserve. At the Budget this week I will set out how we will take the fair choices to deliver on the country's priorities to cut NHS waiting lists, cut national debt and cut the cost of living.”  

The confirmation of the above-inflation increase comes ahead of the chancellor’s Budget on Wednesday, in which she is expected to freeze income tax thresholds by a further two years until 2030. Those in receipt of a full new state pension will soon cross the £12,570 lower limit for basic rate tax.  

Pensions director at provider Aegon, Steven Cameron, said: “While welcome, the increase does come with a sting in the tail for future years”. 
  

He also warned of the administrative issues ahead: “Currently, there is no facility to deduct tax direct from state pensions, with income tax on overall retirement incomes being deducted from private and workplace pensions. So those with solely a state pension could face receiving letters from the taxman demanding they pay the tax due. While of modest amounts, this could create anxiety amongst many vulnerable pensioners.” 

 

The cost of sending out tax letters and administering payments “could wipe out much of the increased tax due”, he noted, suggesting the government could waive very small tax bills but admitting that the amounts raised will increase as the state pension goes up with tax thresholds are frozen. 

 

“We urge the government to be clear with affected state pensioners if they can expect to receive tax bills in future years,” he said.  

Before coming to power, Labour pledged to maintain the triple lock to secure pensioners’ support. However, it angered the voter group when the new government’s first policy choice last year was to means-test the winter fuel allowance at pension credit level. Backbench pressure resulted in a humiliating U-turn, bringing the means-test to £35,000 – the average earnings of working age people. The government is also due to appear in court over its decision not to compensate 1950s-born women for its state pension age blunder, a decision which is now also being reviewed.
   

   

There are about 13m state pensioners in the UK. Earlier this year, the Office for Budget Responsibility warned the triple lock will cost £15.5bn a year in 2029-30, three times as much as originally projected, because of higher inflation and earnings volatility. As the number of over-65s is increasing, the government will seek to limit the cost increase of the state pension by putting the eligible age up to 67 from April next year. It is due to rise to 68 from 2044, though an independent review is currently underway that could recommend changing the trajectory.