𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

New state pensioners aged 77 and under across the UK are set to receive a payment boost of up to £488 per year under Andy Burnham’s Government from next April. The extra cash is set to come from a 3.9% rise to State Pension rates at the start of the new tax year on April 6 in line with the triple lock. The triple lock is a Government guarantee that the State Pension will rise every April by whichever is the highest out of three key measures: the consumer price index (CPI) measure of inflation (measured for September the year before), average wage growth between May and July the previous year, or 2.5%. In the 2027 to 2028 tax year, the State Pension is on course to rise by £3.9% in line with average wage growth, as this has been revealed as the highest figure out of the triple lock measures.

The Office for National Statistics (ONS) on Wednesday (October 21) announced that the rate of CPI inflation was 3.5% in September, accelerating from 3.1% in August, but this is lower than the 3.9% wage growth figure that had already been published, and the 2.5% minimum floor figure. As such, the 3.9% average earnings figure is expected to drive next year’s State Pension rise which would put pensioners on the full new State Pension on course to receive £250.70 per week, up from £241.30 per week currently.

Over a full year, this amounts to a maximum of £13,036.40 in State Pension payments, giving those eligible for the full amount an annual boost of £488.80. Of course, these figures are based on the maximum possible amount for those with a full qualifying National Insurance record, so those without enough qualifying years will receive less.

This payment boost would affect new state pensioners who reached State Pension age from April 6, 2016, when the qualifying age was set at 63 to 65. This later continued to rise to age 66, meaning new state pensioners will now all be aged under 77.

As for the older pensioners who get the old basic State Pension, which is given to men born before April 6, 1951, and women born before April 6, 1953, a 3.9% increase would take rates to £192.10 per week, up from £184.90, giving pensioners entitled to the full amount a maximum of £9,989.20 in State Pension payments per year—an annual boost of £374.40. As the personal tax allowance has been frozen at £12,570 since 2021, it means state pensioners will be caught within the tax net for the first time.

So far, the Government has said pensioners who are wholly dependent on the new State Pension—with no private pension—or the old basic State Pension, “with no increments”, will not have to pay tax. It’s still unclear exactly how the policy will work, but the Government is expected to set out further details in the Budget on October 28.

Rachel Vahey, head of public policy at AJ Bell, said: “Pensioners are set to receive just shy of £500 extra in their State Pension next year. The full new State Pension is set to surge past £13,000 for the first time, leaving the frozen £12,570 personal allowance trailing in its wake.

“The Government has promised that those living solely on a State Pension above the allowance will not pay income tax on it – but the crucial detail on how that will work is still missing. Pensioners are now looking to next week’s Budget to fill in the blanks.” Prime Minister Andy Burnham has already announced plans to scrap the triple lock in 2030 in favour of a “double lock” system, but pledged to honour the manifesto promise to keep the triple lock unchanged throughout this Parliament.

It means the current method of calculating State Pension rises will remain in place until 2030, but from this point Mr Burnham has proposed that the State Pension will continue to rise every year at least by prices or 2.5% – removing the link to average earnings—with the savings generated from this change to be used to “build up our National Care Service”.

Under the plans for the triple lock changes, the State Pension would not fall below its level as a share of average earnings when the triple lock is adjusted. A Government spokesperson said: “We are committed to the triple lock for the rest of this Parliament, and the adjusted triple lock will build on the gains the policy has made for pensioners in raising the State Pension.

“This means the State Pension will always increase by at least the highest of 2.5%, CPI inflation or a new earnings link, so that the State Pension will never fall below its record high level when we adjust the current triple lock.”