MILLIONS claiming the state pension will get a boost of up to £574.60 next April, which is higher than previously expected.
Under the triple lock policy, the state pension goes up each year by either inflation, 2.5% or average earnings growth – whichever is the highest figure.
The state pension will rise by higher than expected[/caption]
Today, the Office for National Statistics (ONS) has published revised estimates of the growth in average earnings in the year to May-July 2025.
It showed that total pay including bonuses for the three months to July was actually 4.8%, higher than the previously estimated figure of 4.7%.
This means the annual rate of the new state pension – which is for those who reached pension age after April 2016 – is around £10 higher than if the increase had been based on last month’s reading.
Under new revisions, the new state pension is expected to increase to £241.30 a week.
This marks an increase of £11.05 and will see the total yearly payment rise to £12,534.60. That is an increase of £574.60 compared to now.
Last month, it was estimated the new state pension would increase to increase to £241.05 a week or £12,534.60 a year.
Today’s revisions also mean the old basic state pension is expected to go up to £184.90 a week or £9,614.80 a year.
Steve Webb, partner at pension consultants LCP said:“We can now be pretty certain that the new state pension and the basic state pension will rise by 4.8%.
“This will keep the headline rate of the state pension below the income tax threshold for one more year, but it will go above the tax threshold in 2027 if allowances do not rise”.
Last month, the government confirmed it would keep the triple lock in place.
Speaking at the time, Pat McFadden, the new Work and Pensions Secretary said the Labour government was committed to maintaining the triple lock for the course of this Parliament.
“It is estimated that will mean a rise in the State Pension of around £1,900 a year by the end of the Parliament.”
However, it means the standard rate of the new state pension is moving closer to the frozen personal tax allowance.
Your standard personal allowance is the amount of income you are allowed each year without paying tax and is locked at £12,570.
A pensioner with no other income bar their state pension will become a taxpayer come 2027.
In May 2024, then Chancellor Jeremy Hunt said the income tax personal allowance would be frozen at £12,570 until 2028.
The freeze was first put in place in 2021.
In her first Budget in October, Chancellor Rachel Reeves had been widely expected to extend the freeze beyond 2028.
However, she confirmed the Government would increase the thresholds in line with inflation from this date.
Many pensioners already pay tax on their state pension due to additional top-ups and extra payments.
Last April, it was reported that the triple locked system pushed the total number of pensioners paying income tax to 650,000.
How can I protect myself from paying tax?
There are a number of measures you can take to mitigate the amount of tax you have to pay.
One way is to take advantage of all the tax-free incentives on offer.
For example, make sure to put any savings into an ISA. These savings vehicles let you deposit up to £20,000 per year, and any interest or returns you earn are tax-free.
And it is not just the interest you earn on them that is tax-free, but any withdrawals too.
For example, withdrawing 4% a year from a £100,000 ISA pot in retirement would amount to £4,000 of tax-free income each year, compared to taking it out of a regular savings account, which is subject to tax.
This could also be a good time to take advantage of pension savings.
You can save money into a pension tax-free, and any money saved into your retirement pots then has the opportunity to grow tax-free over time.
You can then withdraw up to 25% of your pot tax-free when you reach retirement age.
You can either do this as a lump sum or in smaller gradual amounts to top up your state pension without being taxed on it.
How does the state pension work?
AT the moment the current state pension is paid to both men and women from age 66 – but it’s due to rise to 67 by 2028 and 68 by 2046.
The state pension is a recurring payment from the government most Brits start getting when they reach State Pension age.
But not everyone gets the same amount, and you are awarded depending on your National Insurance record.
For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings.
The new state pension is based on people’s National Insurance records.
Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension.
You earn National Insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit.
If you have gaps, you can top up your record by paying in voluntary National Insurance contributions.
To get the old, full basic state pension, you will need 30 years of contributions or credits.
You will need at least 10 years on your NI record to get any state pension.
