The state pension is set to rise by £550 next year under triple lock

pensioners There are preparations to increase it from April next year. state pension This is set to increase by more than £550 per year.

This is because of the rules surrounding state pension triple lock And recent economic data.

At present, the decision to increase the state pension is taken by either of the inflation, Salary increment Or 2.5 percent – ​​whichever is higher. This is to ensure pensioners’ incomes do not leave them behind as the cost of living continues to rise – although people are living longer and pension bills are rising faster, Changes are likely to occur in the future,

Rachel Reeves has now announced it will rise by around £550 for this year, above the rate of inflation, which is currently 3.6 per cent.

“Whether it’s our commitment to the triple lock or rebuilding our NHS to cut waiting lists, we are helping to give pensioners the security they deserve in retirement,” the Chancellor said.

“At the Budget this week, I will explain how we will make appropriate choices to meet the country’s priorities of cutting NHS waiting lists, cutting the national debt and cutting the cost of living.”

How much is the state pension and how much will it increase?

Now, full new state pension That’s £230.25 per week or £11,973 per year.

The 4.7 per cent increase – which was earnings growth – means paying £241.05 more per week, £561 more per year, totaling around £12,534 for those who get the full new state pension.

These numbers only reflect what pensioners on the new state pension would receive if they received the full amount.

who are on the old basic state pension The full increase will not be received, as a portion of it increases with inflation.,

Do I have to pay tax?

One important thing to note is that with the increase in state pension income comes another dilemma for those receiving it: the ability to pay taxes, which they previously did not need to.

Standard Life figures show the full state pension of £12,534 would cover 99.7 per cent of everyone’s personal allowance.

“The planned uplift will provide some relief for pensioners struggling with rising bills and the lingering effects of inflation on everyday essentials,” said Mike Ambury, retirement savings director at Standard Life.

“However, a full new state pension would also exceed 99 per cent of the personal allowance, which is currently frozen at £12,570 until 2028 – by contrast, the new state pension in 2021/22 was equivalent to 74 per cent of the allowance. This means pensioners will need only £35.40 of other income before paying income tax.

“Just over the decade before 2020 the personal allowance as a percentage of average earnings grew quite rapidly, from 23.61 per cent in the 2007/08 tax year to just under 45 per cent in 2020. Since 2020, this decline has been seen in combination with a freeze and inflation, meaning a larger percentage of income is taxable.

“For pensioners paying a higher rate of tax, the value of the £561.60 increase will be reduced by around £337.”

Will there be triple lock?

The upcoming increase means the triple lock is likely to come under increasing scrutiny in political circles, while demands to increase the personal allowance will also revive.

New Work and Pensions Secretary Pat McFadden previously confirmed that the pension triple lock promise would be honoured.

He said, “This Labor Government is committed to maintaining the triple lock during this Parliament. It is estimated that the state pension will increase by approximately £1,900 per year by the end of this Parliament.”

“This is the Labor government’s commitment to UK pensioners. It’s something we said we would do at the election and it’s something we will stick to.”

Rachel Wahi, head of public policy at AJ Bell, said it was a difficult time for the Chancellor to balance another argument ahead of the Budget.

“This puts the state pension above £12,000 for the first time and dangerously close to the frozen personal allowance,” Ms Vahey said.

“This poses a significant puzzle for Rachel Reeves and the Treasury. If, as is likely, the triple lock sees the state pension rise above the personal allowance of £12,570 for the first time in April 2027, the Government will come under increasing pressure to make a decision regarding the personal allowance or whether it can maintain the triple lock as it has promised until at least the end of this Parliament.

“Removing the cap on personal allowances would impose significant costs to the Treasury at a time when the Chancellor’s fiscal headroom is already at its most strained, while an overhaul of the triple lock would come with huge political risks ahead of the next general election. Needless to say, this is a headache Starmer and Reeves cannot afford before a crucial Budget in November, and economic and political pressures are already beginning to mount both within and outside the Labor Party.”

The standard personal allowance is £12,570, which is the amount of income you don’t have to pay Tax On the official website note.

Beyond that figure, the basic tax rate will apply. This includes income from property, dividends, earnings or elsewhere.

It is important to remember that tax will be paid only on the part of the income above the personal allowance limit and not the entire amount.

These numbers apply to the new state pension, rather than the original state pension, for people born before 1951 (men) or 1953 (women).

Sarah Coles, head of personal finance at Hargreaves Lansdown, recently said: “The Bank of England expects inflation to ease in the coming months, so that by the time we get to the state pension rise in April next year, the rise could be well ahead of the annual price rise.”

“Of course, this is only part of the picture. Inflation has been particularly concentrated on household bills and food prices, on which low-income pensioners spend a large proportion of their income. This means many of those who rely heavily on the state pension will be holding their breath for a rise in the spring.”