Older state pensioners are set to receive a lower Triple Lock boost than new, post-2016 state pensioners, according to figures released today (Wednesday, October 21). New state pensioners are in line for an increase worth approximately £488 a year, while older pensioners will see a £374 annual boost.
The figures confirm that wage growth of 3.9% will be used to calculate next April's increase, rather than inflation at 3.5% or the flat 2.5% floor. The Triple Lock system, enshrined in law, requires the Department for Work and Pensions (DWP) to increase state pension payments each year by the highest of inflation, wage growth, or 2.5%.
What the increase means for pensioners
The basic state pension for older, pre-2016 pensioners will rise from its current £184.90 to approximately £192 per week, or £374 a year. New state pensioners, who receive larger weekly payments, will get an extra £488.80 a year, pushing the full new state pension past £13,000 for the first time.
The new state pension, introduced in 2016, applies to men born after April 5, 1951 and women born after April 5, 1953. New state pensioners cannot access some pension uplifts such as Second State Pension or Additional Pension payments.
Minimum rise and tax implications
The absolute minimum rise possible for a new state pensioner is £313.69 a year, based on the 2.5% floor, while older pensioners face a minimum of £240.37 a year. The Government has said pensioners wholly dependent on the state pension, with no private pension or increments, will not pay tax on the increase.
Prime Minister Andy Burnham has scrapped the Triple Lock boost, but not until 2030. For now, pensions will continue to uprate each April as normal.
Experts react to the boost
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."
Claire Trott, head of advice at St James's Place, said: "While the uplift in income will be welcomed by many, it also marks a significant milestone, with the full new state pension exceeding the £12,570 personal allowance for the first time. Although those receiving only the state pension are not expected to face a tax bill, pensioners who draw on other sources of income, such as workplace or private pensions, savings or earnings from work may find themselves with a higher tax liability as a result. It's therefore worth taking a closer look at your retirement income ahead of April to make sure you understand what the changes could mean for you and plan accordingly."
Further details are anticipated in the Budget, due in one week.
