State Pension payments will rise by 3.9% from next April, taking the full new State Pension to £250.70 per week, under the government led by Prime Minister Andy Burnham.
The increase, confirmed in Budget documents released today, follows the triple lock mechanism, which raises rates each April by whichever is highest of inflation, wage growth, or 2.5%. Average wage growth has been confirmed as the highest figure at 3.9%, beating inflation at 3.5% and the 2.5% floor.
New and basic State Pension rates
The uplift means the full new State Pension will rise from its current rate of £241.30 per week to £250.70, a weekly increase of £9.40. Over a full year, this amounts to a maximum of £13,036.40 in payments, giving eligible pensioners an annual boost of £488.80.
This applies to new State Pensioners who reached State Pension age from April 6, 2016, when the qualifying age was set at 63 to 65. The qualifying age later rose to 66, meaning new State Pensioners will now all be aged under 77.
Older pensioners receiving the old basic State Pension will see a 3.9% increase, taking rates to £192.10 per week, up from £184.90 currently - a weekly boost of £7.20. Over a full year, older pensioners entitled to the full amount would get a maximum of £9,989.20, providing an annual boost of £374.40.
Triple lock commitment and future changes
The Budget documents state: "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."
The documents add: "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."
The government has committed to the triple lock for the rest of this Parliament, but plans to adjust it from April 2030. From that point, the State Pension will rise each year by the highest of 2.5%, inflation, or the amount required to maintain its value relative to earnings as reached in April 2029.
Tax implications and future savings
As the personal tax allowance has been frozen at £12,570 since 2021, the 3.9% rise will see some State Pensioners be caught within the tax net for the first time. The government has said pensioners wholly dependent on the new or old basic State Pension "with no increments" will not have to pay tax, even if they exceed the threshold.
The Prime Minister said the State Pension "will hold its value relative to earnings over time so that pensioners will always share in the rising prosperity of the nation". Adjusting the triple lock is estimated to reduce State Pension spending by £15 billion a year by the end of the 2030s, rising to £50 billion a year by 2050.
