The full new state pension is on course to rise to £250.70 a week from next April, taking the annual amount to £13,036, after the final part of the triple lock was confirmed.
The triple lock ensures that the state pension rises every April by whichever is higher out of inflation (using the previous September inflation figure), wages (average growth between May and July) or 2.5%.
September inflation was confirmed to be 3.5%, meaning wage growth was higher at 3.9% and this will be the measure used to determine the state pension increase. This would put someone on the full new state pension on course to receive £250.70 a week from next April, up from £241.30 a week currently.
Annual amount above tax-free allowance
It means the annual new state pension would hit £13,036 next year, putting it above the tax-free personal allowance, which is £12,570.
The Government has said pensioners whose only income is the basic or new state pension "without any increments" will not have to pay tax, but no information about what this means in practice has been released yet. Further details are anticipated in the Budget next week.
Someone on a full basic state pension would receive £192.10 a week, up from £184.90, under a 3.9% increase. This would put the basic state pension at around £9,989 per year. But many people on the old pension system receive additional top-ups that boost their income.
Top-ups and deferral boosts
This is known as SERPS (state earnings-related pension scheme) and this is worth a maximum of £230 a week. Some people would also receive higher amounts of the state pension if they deferred their payments.
For the new state pension, you get an extra 5.8% for each year you defer receiving your payments. While those on the basic state pension get a bigger boost of 10.4% for every year they defer, or a lump sum plus interest.
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."
Plans for an adjusted triple lock
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: "The state pension is, and will remain, a firm foundation on which to build your retirement income. However, the reality is it is only going to cover the basics no matter how it is increased. If you want to maintain the lifestyle you enjoyed while working, it's important to make the most of your pension.
"Taking small steps, such as boosting contributions whenever you get a pay rise or promotion, can be really useful. If your employer will increase their contribution if you increase yours, then that can also really pay off long-term."
Prime Minister Andy Burnham has previously said that from April 2030, Labour plans to adjust the triple lock, which is used to increase state pensions each April. Under the plans, the state pension would continue to rise every year at least by inflation or 2.5%, but it would still track average wages over time. The state pension overhaul would help to fund a new National Care Service in England.
A Government spokesperson said: "We are committed to the triple lock for the rest of this Parliament, and the adjusted triple lock will build on the gains the policy has made for pensioners in raising the state pension.
"This means the state pension will always increase by at least the highest of 2.5%, CPI inflation or a new earnings link, so that the state pension will never fall below its record high level when we adjust the current triple lock.
"We also know energy prices weigh heavily on people's minds, which is why, alongside giving millions of pensioners a winter fuel payment, we have expanded the £150 warm home discount to six million households and cut VAT on energy bills."
