The Department for Work and Pensions (DWP) is set to raise weekly state pension payments for pensioners born before 1953, starting in April 2026.
This increase is driven by the government’s triple lock policy, which annually boosts the state pension by the highest of inflation, average wage growth, or 2.5%. For the upcoming adjustment, wage growth leads at 4.8%, resulting in the most substantial rise.
Consequently, the new state pension is expected to increase by £574.60 annually, while the basic state pension will go up by £439.40. This represents a £120 higher increase than if the raise were based solely on inflation, according to Treasury estimates.
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Reaching this full increase, the new state pension will amount to approximately £12,547 per year, just £23 below the current personal income tax threshold of £12,570, as noted by pension consultancy LCP.
The older basic state pension will also benefit, rising from £9,175 to £9,614 annually.
Steve Webb, a partner at LCP, commented, “This adjustment keeps the headline state pension rate just under the income tax threshold for one more year. However, if tax allowances remain unchanged, pensions are expected to exceed the threshold in 2027.”
To be eligible for the basic State Pension, individuals must have reached State Pension age before April 6, 2016, and have accrued sufficient National Insurance qualifying years.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, emphasized: “With recent inflation figures, pensioners can anticipate another boost to their annual state pension payments next April that will outpace inflation.”
She also warned that since the personal allowance has not increased above £12,570 since the 2020-21 tax year, some retirees may face income tax liabilities unless the Chancellor announces changes in the upcoming Budget.
“Some retirees are already paying tax on their retirement income, either due to deferring state pension access or having additional private pension income,” Haine added.