Some 12.7 million people over State Pension age will find out how much their regular payments will rise next April two weeks before Chancellor Rachel Reeves confirms the annual uprating during the Autumn Budget in Parliament on October 30. The Labour Government has committed to honouring the Triple Lock and the final measure that makes up the policy is due to be published by the Office for National Statistics (ONS) on Wednesday, October 16.
Under the Triple Lock the New and Basic State Pensions increase each year in-line with whichever is the highest between the average annual earnings growth from May to July (4%), Consumer Price Index (CPI) inflation rate in the year to September, or 2.5 per cent. Additional State Pension elements and deferred State Pensions rise each year with the September CPI figure.
The CPI figure for August was 2.2 per cent, while earnings growth is at 4.0 per cent. Pension experts now say it looks highly unlikely that CPI will be higher than the earnings growth rate which means that figure will be used to calculate the State Pension uprating for 2025/26.
Under the latest earnings growth figure, people on the full New State Pension could see payment rise by £8.85 per week from £221.20 to £230.05 and as the payment is typically made every four weeks this amounts to £920.20. This will see annual payments rise by £460 from £11,502 to £11,962 over the 2025/25 financial year.
Similarly, someone on the full Basic State Pension could see weekly payments rise by £6.80 per week from £169.50 to £176.30, or £705.20 every four-week payment period.
The amount of State Pension someone receives depends on the number of National Insurance years they accumulated before retirement. You need at least 10 to qualify for any State Pension and around 35 for the full New State Pension, but this can be higher if you were contracted out – find out more here.
Commenting on the latest CPI figure and State Pension uprating, Mike Ambery, Retirement Savings Director at Standard Life, part of Phoenix Group said: “Unless an unexpected shock drives price rises significantly higher than forecast, we’re unlikely to see a situation where the inflation trigger rather than 4 per cent average earnings ends up determining the Triple Lock, however it’s worth noting that as inflation creeps further above the Bank of England’s 2 per cent target it will erode the real impact of next year’s boost for pensioners.
“With price rises around the 2.2 per cent mark, the real boost for pensioners will be 1.8 per cent – with inflation at target, they would be 2 per cent better off.
He continued: “This winter’s price rises are likely to be heavily driven by rising energy costs. Next year, like this year, there will no longer be a universal Winter Fuel Payment and so if energy prices follow the same pattern in 2025 they could further erode the Triple Lock boost.
“Pensioners on lower incomes and most dependent on the State Pension for income are likely to feel the greatest impact of this – we would urge anyone of State Pension age and on a low income to check their eligibility for Pension Credit using the government’s online Pension Credit calculator.”
State Pension uprating predictions
The calculations below are based on the latest ONS figures using the 4.0 per cent earnings growth as the multiplier.
Full New State Pension
- Weekly payment: £230.05 (from £221.20)
- Four-weekly payment: £920.20 (from £884.80)
- Annual amount: £11,962 (from £11,502)
Full Basic State Pension
- Weekly payment: £176.30 (from £169.50)
- Four-weekly payment: £705.20 (from £678)
- Annual amount: £9,167 (from £6,814)
State Pension and Personal Tax Allowance
The Personal Allowance will remain frozen at £12,570 until 2028. Some 8.1m (64%) older people currently pay tax in retirement, largely due to additional income from workplace or private pensions on top of their State Pension.
Retirement experts at Spencer Churchill predict nearly 900,000 more people will exceed the Personal Allowance threshold of £12,570 over the current financial year.
It’s important to be aware that older people whose sole income this year is the State Pension will not pay tax, and anyone with additional income who does not pay HM Revenue and Customs (HMRC) directly through earnings, will not receive a tax bill until June or July 2025, which must be paid by the end of January 2026.
The full New State Pension is worth £11,502 this year, this leaves just £1,068 before the personal tax threshold is exceeded, so anyone with additional income of £89 or more per month – on top of State Pension – may receive a tax bill next year.
Someone on the full rate of the Basic State Pension will receive £8,814, this leaves just £3,756 before the personal tax threshold is exceeded, equivalent to additional income totalling £313 per month.
Retirement expert Adam Pope said: “Freezing income tax thresholds for pensioners is worrying and could really affect their financial situation. Almost two million pensioners are expected to be hit by this in the next four years, meaning many of them will have to pay more tax.
“This is especially tough for those mainly living off the State Pension. With no change in the tax thresholds, they could find themselves owing more tax than they expected, making things hard if they don’t have much to begin with.”
The pensions expert continued: “As the State Pension amount goes up, more pensioners could have to pay more tax, making life harder for those already struggling. Over 60 per cent of pensioners are paying income tax, up from about 50 per cent in 2010.
“What’s more, keeping income tax thresholds the same could mean pensioners have less money to spend. By 2027/28, the average tax-paying pensioner could be £1,000 worse off which could really affect their living standards and financial safety.”