More than 13 million people over State Pension age across the UK, including 1.1 million in Scotland, will find out how much their payments will rise next April a week before Chancellor John Healey announces the annual uprating during the Autumn Budget on October 28.
The Labour Government has committed to honouring the Triple Lock in its current format until April 2029, with changes to the uprating mechanism set to be introduced for the 2030/31 financial year. The final measure for the 2027/28 uprating is due to be published by the Office for National Statistics (ONS) on Tuesday, October 20, and looks set to be determined by the earnings growth figure of 3.9 per cent.
How the Triple Lock works
Under the Triple Lock, the New and Basic State Pensions increase each year in line with whichever is the highest between the average annual earnings growth from May to July (3.9 per cent), Consumer Price Index (CPI) inflation rate in the year to September (currently 3.1 per cent), or 2.5 per cent. Additional State Pension elements and deferred State Pensions rise each year with the September CPI figure.
The CPI figure for August was 3.1 per cent, and pension experts say it now looks unlikely CPI will be higher than the earnings growth rate of 3.9 per cent.
Projected payment increases
This means people on the full New State Pension could see payments rise by around £490 next year. The increase under the earnings growth measure would see weekly payments of the New State Pension rise to up to £250.70, and £192.10 for those on the Basic State Pension.
If September’s inflation figure remains lower than the earnings growth measure, the full New State Pension will be worth £13,036 over the 2027/28 financial year. However, the projected uprating would also see the full New State Pension exceed the Personal Allowance limit of £12,570 by £466, meaning more pensioners could pay tax in retirement.
The Labour Government has said no pensioner whose sole income is the New State Pension will pay tax, despite the Personal Allowance being frozen at £12,570 until April 2031. It’s important to remember the amount someone receives depends on their National Insurance contributions. To receive the full New State Pension, you need around 35 years’ worth, but this may differ if you were ‘contracted out’.
Expert comment and forecast
Commenting on the latest earnings growth figures from the ONS, Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Pensioners stand to be almost £490 better off next year as today’s earnings figures have a huge impact on next year’s State Pension.
“This would put someone on the full New State Pension on course to receive £250.70 per week from next April – up from the current £241.30 per week. Someone on a full Basic State Pension would receive £192.10 per week - up from £184.90.”
The Triple Lock is currently on track to be determined by the earnings growth element of 3.9 per cent (including bonuses). The CPI for September will be published on October 20 and is currently 3.1 per cent. The Chancellor will confirm the annual uprating at the Autumn Budget on October 28, however, an uprating of 3.9 per cent would see people receive the following amounts.
Full New State Pension
- Weekly: £250.70 (from £241.30)
- Four-weekly pay period: £1,002.80 (from £965.20)
- Annual amount: £13,036 (from £12,547)
Full Basic State Pension
- Weekly: £192.10 (from £184.90)
- Four-weekly pay period: £768.40 (from £739.60)
- Annual amount: £9,989 (from £9,614)
Guidance on GOV.UK states: “You pay tax if your total annual income adds up to more than your Personal Allowance. Find out about your Personal Allowance and Income Tax rates. Your total income could include: the State Pension you get - Basic or New State Pension, Additional State Pension, a private pension (workplace or personal) - you can take some of this tax-free, earnings from employment or self-employment, any taxable benefits you get, any other income, such as money from investments, property or savings.”
Before you can check if you have to pay tax on your pension, you will need to know if you have a State Pension or a private pension, how much State Pension and private pension income you will get this tax year (April 6 to April 5), and the amount of any other taxable income you’ll get this tax year (for example, from employment or state benefits). You cannot use this tool if you get any foreign income, Marriage Allowance, or Blind Person’s Allowance. Use this online tool at GOV.UK to check if you have to pay tax on your pension.
