Older state pensioners are in line for up to another £374 extra per year after the government confirmed it will keep the triple lock in place for April, with the full new state pension rising to £250.70 per week.
Under Prime Minister Andy Burnham, the triple lock figures will be maintained for the next Budget, and the Chancellor has confirmed the mechanism will stay until 2030. State pensioners who reached state pension age before April 2016 are set for a smaller increase than new state pensioners because their weekly payments are lower, although they are not entitled to some older pensioner schemes such as Second State Pension.
Triple lock confirmed until 2030
Mr Burnham has already confirmed he will stand by the triple lock for the rest of this Parliament, despite plans to axe it from 2030. The triple lock is the mechanism which uprates state pension payments annually by one of three metrics: inflation, wage growth, or a flat 2.5%, whichever is highest.
Budget documents released today have confirmed the Chancellor will stand by the triple lock until 2030. The document says: "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."
New state pension rises to £250.70 weekly
The Office for National Statistics (ONS) has confirmed that the rate of Consumer Prices Index (CPI) inflation 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 for 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, or £13,036 per year. Someone on a full basic state pension will receive £192.10 per week, increasing from £184.90, reaching around £9,989 per year.
Tax implications for pensioners
With the personal tax allowance still frozen at £12,570 until 2031 unless the freeze is dropped sooner, 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 from the triple lock boost. That is why 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.
Many state pensioners will not qualify for this exemption and as such will be liable to pay tax on their state pension, as they always have, as many will have a private pension or savings. This is not in itself a new development – the state pension has always been taxable, and households who are, for example, still working, would lose some of their DWP state pension payments to tax once their earnings and state pension were added together and 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.
