Older state pensioners are in line for a boost to their state pension worth approximately £374 a year, taking weekly payments to a boosted £192.10 per week. Forecasts for the Triple Lock, still confirmed to remain in place for 2027, show that the benefit is currently set to increase by 3.9% in April 2027.
Triple Lock Increase Details
The old state pension was closed off as of April 2016. State pensioners who began to claim DWP payments before that date were only entitled to the old state pension, while younger state pensioners first claiming after that date were given the 'new state pension', which distributes higher weekly payments but no longer includes some elements like Additional Pension (AP) payments.
The DWP has to increase the amount paid to those who receive the state pension each year due to the 'Triple Lock' system, which enshrines in law that everyone eligible for the handout must see an increase each year, either level with inflation, wage growth, or by 2.5%, whichever is highest.
Triple Lock Scrapped in 2030
The triple lock, the metric increasing the payments, has been scrapped by Andy Burnham pending Parliamentary process, but the change will not be made until 2030. That means state pensioners will still get increases to their payments based on the triple lock in 2027 as planned.
Under the triple lock mechanism, the state pension sees an annual rise in April in line with inflation, wages, or 2.5% – whichever is higher. The Office for National Statistics (ONS) said on Wednesday that the rate of Consumer Prices Index (CPI) inflation was 3.5% in September, accelerating from 3.1% in August. But this does not beat the 3.9% wage growth figure that had already been published.
New State Pension Payments
This would put someone on the full new state pension on course to receive £250.70 per week from next April – up from £241.30 per week currently. Someone on a full basic state pension would receive £192.10 per week, increasing from £184.90, reaching around £9,989 per year.
The absolute minimum rise possible for older state pensioners is £240.37 extra per year, as this is how much the current £9,614.80 annual payments must rise if the lowest possible increase, a flat 2.5%, is the metric used to increase state pensions this year.
Tax Implications
With the personal tax allowance frozen at £12,570, some pensioners are heading towards being caught within the tax net – with the annual new state pension poised to be pushed up to around £13,036 next year. The Government has said pensioners who are wholly dependent on the new state pension – with no private pension – or the old "basic" pension, "with no increments" will not have to pay tax. Further details are anticipated in the Budget.
Rachel Vahey, head of public policy at AJ Bell, said: "Pensioners are set to receive just shy of £500 extra in their state pension next year. The full new state pension is set to surge past £13,000 for the first time, leaving the frozen £12,570 personal allowance trailing in its wake. The Government has promised that those living solely on a state pension above the allowance will not pay income tax on it – but the crucial detail on how that will work is still missing. Pensioners are now looking to next week's Budget to fill in the blanks."
