People on State Pension due payments of up to £925 each month from next April

New figures published by the Office for National Statistics (ONS) on Tuesday show that average regular earnings growth dropped from 4.5 per cent to 4.0 per cent (including bonuses) in the three months to July. This is an important figure for 12.7 million State Pensioners across Great Britain to be aware of as it now looks set to be the driving measure for the annual April uprating, under the Triple Lock policy.

However, it’s important to be aware that September’s Consumer Price Index (CPI) inflation rate is also one of the measures and won’t be announced until mid-October - it’s currently at 2.2 per cent, but now looks unlikely to be higher than 4.0 per cent.

This means that 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.

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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.

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, CPI in the year to September, or 2.5 per cent.

State Pension uprating predictions

Chancellor Rachel Reeves will confirm the annual State Pension and benefits uprating during the Autumn Budget on October 30, 2024.

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)

Additional State Pension elements and deferred State Pensions rise each year with the September CPI figure.

Simon Kew, Head of Market Engagement at leading independent financial services consultancy Broadstone, said: “With inflation back below 2.5%, the earnings figure looks likely to trigger this year’s Triple Lock and deliver a £460 a year boost to the State Pension.

“It follows on from two substantial increases of 10.1% and 8.5% over the past two years meaning the State Pension is set to rise to £11,962 a year from next April. While this will cushion the blow to many following the means-testing of winter fuel payments, the coming increase to energy bills and sustained rises in the cost of living since the pandemic will still be squeezing pensioners’ budgets.

“Questions around the long-term sustainability of the State Pension are only likely to intensify as the bill to the Chancellor of the Exchequer increases amid an expanding pensioner community.”

State Pension and Personal Tax Allowance

The Personal Allowance will be 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.”