State pensioners are poised to receive significantly higher payments from the Department for Work and Pensions (DWP) due to the rising impact of the Triple Lock policy. The Labour Party has announced a 4.8% increase in the state pension for the 2026/27 financial year, bringing the annual payment to £12,547. This is up from £11,973 last year and just £23 short of the frozen personal allowance threshold of £12,570.
Steven Cameron, pensions director at Aegon, welcomed the increase but highlighted concerns for future years. “Thanks to the triple lock, the full state pension will increase by at least 2.5% in the coming years, meaning it will reach at least £12,861 in 2027/28. This surpasses the current personal allowance, which is frozen until April 2028, with speculation that the freeze could extend to 2030. Consequently, pensioners whose only income is the state pension may face a tax charge on the amount exceeding the allowance, starting at a minimum of £58 annually. This situation feels like giving with one hand and taking with the other.”
Cameron noted that even modest tax charges could cause anxiety among vulnerable pensioners. Additionally, he pointed out the administrative costs of processing tax demands, which might negate the revenue gained from small tax bills. “This could justify waiving particularly small payments, but if the personal allowance freeze extends, the amounts due will increase year on year, making waivers less likely. We urge the government to clearly inform pensioners about any future tax liabilities,” he added.
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David Brooks, head of policy at pension consultancy Broadstone, commented on the broader implications: “The substantial rise in the state pension will reignite debates about the long-term sustainability of the triple lock due to its growing cost to the public purse. With the ongoing review of the state pension age, it remains to be seen whether any proposals will suggest raising the eligibility age more quickly or significantly.”
As the UK faces ongoing cost-of-living pressures, the confirmed pension increase offers reassurance to those relying mainly on the state pension for their income during challenging times.