State pensioners aged under 77 are set to receive an additional £488.80 per year under the new Prime Minister Andy Burnham, as the triple lock has been confirmed to remain in place until 2030 in today's Budget.
New state pensioners who reached state pension age during or after April 2016, meaning they are now no older than 77, are set for a larger triple lock increase than older pensioners because their weekly payments are higher. However, these new state pensioners are not entitled to some defunct schemes such as the Second State Pension.
Triple Lock Commitment Confirmed
New Budget documents released today confirm that the Chancellor will uphold the triple lock for the rest of this Parliament, despite plans to axe it from 2030. The triple lock is the mechanism that uprates state pension payments annually by one of three metrics: inflation, wage growth, or a flat 2.5%, whichever is highest.
The document states: "In line with the government’s commitment to the Triple Lock throughout this Parliament, the State Pension will continue to rise by the highest of 2.5%, inflation or earnings growth each year through to April 2029."
It adds: "This is set to see the annual rate of the full new State Pension increase by more than £2,000 over the course of the Parliament, taking the State Pension to a record high relative to earnings."
Inflation and Wage Growth Figures
The Office for National Statistics (ONS) has confirmed that the Consumer Prices Index (CPI) inflation rate was 3.5% in September, accelerating from 3.1% in August. This does not beat the 3.9% wage growth figure that had already been published, meaning the triple lock calculations and uplift figures are now confirmed.
Someone on the full new state pension, who reached state pension age after April 2016, is on course to receive £250.70 per week from next April, up from £241.30 per week currently, if they have a full National Insurance record, equating to £13,036 per year.
Tax Implications for Pensioners
With the personal tax allowance frozen at £12,570 until 2031, some pensioners are heading towards being caught within the tax net, as the annual new state pension is poised to be pushed up to around £13,036 next year from the triple lock boost.
The Government has already announced that state pensioners who are wholly dependent on the DWP’s new state pension, with no private pension, or the old "basic" pension, "with no increments," will not have to pay tax even if they break the threshold, a policy now called the Pension Tax Allowance. Many state pensioners will not qualify for this exemption and will be liable to pay tax on their state pension, as they always have, particularly those with a private pension or savings.
The state pension has always been taxable, and households still working would lose some of their DWP state pension payments to tax once their earnings and state pension exceeded the £12,570 threshold. This will continue in April, but it will mark the first time that the state pension payments themselves already break the threshold at £13,036.
