The Department for Work and Pensions (DWP) has confirmed the full state pension rates for 2026 to 2027, revealing a £3,047 annual gap between the new and old rates. The Labour government announced a 3.9% increase to state pension rates during Wednesday's Budget, presented by John Healey.
From next April, the new state pension will rise to £250.70 a week, or £13,036 a year, according to HM Treasury. The old state pension will increase to £192.10 a week, or £9,989.20 a year. The difference between the two rates means pensioners on the old rate will receive £3,047 less each year.
Who is affected by the lower old state pension rate?
The old basic state pension is paid to 8.2 million retirees, who generally retired before 2016 and were born after 1951 (for men) or after 1953 (for women). These pensioners will be thousands of pounds worse off compared with those receiving the new rate.
In addition to the lower weekly payments, this group could also be adversely affected by forthcoming HM Treasury inheritance tax changes, as reported by Birmingham Live.
Inheritance tax changes add to pensioners' concerns
Sean McCann, chartered financial planner at NFU Mutual, the UK's leading rural insurer, said: "There were no changes to the plans that will see pensions included within inheritance tax calculations from April which will mean some families will be hit with a triple tax blow, through a combination of inheritance tax on the pension, loss of the tax break on the family home and additional income tax if their loved one dies after age 75."
McCann added: "There are steps you can take to mitigate the impact, including ensuring you take your tax-free lump sum before age 75, while it may still be subject to inheritance tax it will avoid an additional income tax charge."
He also noted: "We expect to see more people taking regular income from their pensions making use of the unlimited 'gifts from normal expenditure' exemption. This allows you to give regular gifts out of income, which provided they don't impact your normal standard of living are immediately exempt from inheritance tax regardless of whether you survive seven years."
McCann advised: "Before deciding to make big changes, it's important to take advice to ensure that in a rush to avoid the worst of April's tax changes you don't compromise your future financial security."
