Key facts
- The UK state pension is likely to rise by 3.9% in April.
- The increase is based on wage growth data of 3.9% between May and July.
- The triple lock guarantee dictates the pension rise based on wage growth, inflation, or 2.5%, whichever is highest.
- A 3.9% increase would raise the full new state pension to approximately £250.70 per week.
- The annual full new state pension would rise to £13,036.40, surpassing the £12,570 personal allowance.
- An exemption exists for pensioners whose sole income is the state pension, meaning they will not pay tax on it.
The UK state pension is poised for a 3.9% increase next April, a rise driven by recent wage growth data. This uplift could, for the first time, push the full new state pension above the tax-free personal allowance, potentially making it taxable for some pensioners.
Data released by the Office for National Statistics revealed that weekly wages grew by 3.9% between May and July. Under the government's triple lock guarantee, the state pension is increased by the highest of three figures: wage growth, inflation, or 2.5%. With inflation projected to be below the wage growth figure, the 3.9% wage increase is expected to determine the pension rise.
If confirmed, this would raise the full new state pension by approximately £9.40 per week, from £241.30 to around £250.70. Annually, this would amount to £13,036.40, exceeding the current personal allowance of £12,570. This means that for pensioners whose only income is the state pension, a portion of it would become subject to tax.
However, Rachel Reeves, in her previous role as chancellor, introduced an exemption for those whose sole income is the state pension, ensuring they will not pay tax on it even if it surpasses the threshold. Business Secretary Jonathan Reynolds stated that decisions on taxation for pensioners would be made in the upcoming Budget on October 28, emphasizing that most pensioners have additional income sources beyond the state pension.
The official Consumer Price Index (CPI) inflation figures, due on October 21, will serve as the alternative threshold. Unless there is an unexpected surge in inflation, the 3.9% wage-based increase is anticipated to be the determining factor for the pension uplift. The Department for Work and Pensions is expected to formally confirm the revised rates during the autumn statement.