State pensioners are in line for up to another £488.80 extra.
The DWP is set to hand out more to state pensioners (Image: Getty)
State pensioners aged under 77 are currently in line for another £488.80 per year under new Prime Minister Andy Burnham as the triple lock has been confirmed to be kept until 2030 in today’s Budget.
New state pensioners who hit state pension age during or after April 2016 so would now be no older than 77 are set for a larger triple lock increase than older state pensioners as their weekly payments are higher (although the new state pensioners aren’t entitled to some defunct schemes such as Second State Pension).
New Budget documents released today have confirmed that the Chancellor is going to stand by the triple lock for the rest of this Parliament, despite plans to axe it from 2030. The triple lock is the mechanism which uprates state pension payments annually by one of three metrics (inflation, wage growth, or a flat 2.5%, whichever is highest).
The document says: “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.
“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 is committed to delivering a sustainable State Pension system that people can trust will rise every year and be available for current and future pensioners. That is why the government is making those gains permanent by adjusting the Triple Lock from April 2030 so that the State Pension rises 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.”
The Office for National Statistics (ONS) has confirmed that the rate of Consumer Prices Index (CPI) inflation was 3.5% in September, accelerating from 3.1% in August. But this does not beat the 3.9% wage growth figure that had already been published. This means we now have confirmed Triple Lock calculations with confirmed uplift figures.
This would put someone on the full new state pension, so who hit state pension age after April 2016 on course to receive £250.70 per week from next April – up from £241.30 per week currently, if they have a full National Insurance record, or £13,036 per year.
The DWP increases the amount paid to those who receive the state pension each year due to the ‘Triple Lock’ system, which enshrines in law that everyone who is eligible for the handout from the Department of Work and Pensions must see an increase each year, either level with inflation, wage growth or by 2.5%, whichever is highest.
But with the personal tax allowance still to be frozen at £12,570 until 2031 unless the freeze is dropped sooner, some pensioners are heading towards being caught within the tax net – with the annual new state pension poised to be pushed up to around £13,036 next year from the triple lock boost.
That’s why the Government has already announced that state pensioners who are wholly dependent on the DWP’s new state pension – with no private pension – or the old “basic” pension, “with no increments” will not have to pay tax even if they break the threshold, keeping Rachel Reeves‘ policy in place. This is now called the Pension Tax Allowance.
Many state pensioners will not qualify for this exemption and as such will be liable to pay tax on their state pension, as they always have, as many state pensioners will have a private pension or savings.
This is not in itself a new development – the state pension has always been taxable, and households who are, for example, still working, would lose some of their DWP state pension payments to tax once their earnings and state pension were added together and exceeded the £12,570 threshold.
This will continue in April, but it will mark the first time that the state pension payments themselves already break the threshold, at £13,036.