Pensioners across Britain will see their state pension increase by 4.8 per cent from April 2026, following revised wage growth figures that exceeded earlier projections, but face "paying income tax" on payments the following year.
The Office for National Statistics (ONS) reported that total earnings including bonuses climbed to 4.8 per cent for the quarter ending in July, up from an initial estimate of 4.7 per cent.
This figure determines next year's pension rise through the triple lock mechanism, which guarantees annual increases based on the highest of three measures: inflation, average earnings growth, or 2.5 per cent.
The adjustment means millions of retirees will receive a larger boost to their income than previously anticipated.
State pension payments are set to rise next year
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The weekly payment for those on the full new state pension will reach approximately £241.30, translating to an annual income of £12,548, according to calculations by Spencer Churchill Claims Advice.
This marks a significant threshold as the state pension surpasses £12,000 yearly for the first time in its history.
"While the difference may seem marginal, every pound matters when it comes to covering rising living costs," the pension experts noted.
The increase represents crucial support for retirees facing ongoing financial pressures, though the seemingly modest percentage adjustment will deliver meaningful additional income to millions of households.
How much will the state pension triple lock cost the British taxpayer? | OBR However, the Treasury now faces a significant challenge as the rising state pension approaches the frozen personal income tax threshold of £12,570.
Spencer Churchill Claims Advice warned that maintaining the triple lock could see the full state pension exceed the personal allowance by April 2027.
"That would mean some pensioners paying income tax purely on their state pension, something the Government will find politically difficult to justify," the experts cautioned.
The narrowing gap between pension payments and the tax-free allowance creates an unprecedented situation where retirees could face tax bills without any additional income sources..
Analysts note the looming collision between two key Government policies presents ministers with increasingly limited options.
Spencer Churchill Claims Advice stated: "The Government faces a difficult balancing act.
"Removing the freeze on the personal allowance would cost billions at a time when fiscal headroom is already limited, yet scaling back the triple lock risks alienating older voters before the next election."
The experts concluded that "reform may be unavoidable in the long run" as the state pension continues approaching the tax threshold.
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What has the impact of the state pension triple lock been on the public's finances | OBR Later this year, the Department for Work and Pensions (DWP) will distribute its annual Christmas Bonus of £10 to eligible pensioners.
Notably, the bonus, introduced by Ted Heath’s Government in 1972, has never been uprated with the triple lock.
If the payment rate has kept pace with the state pension, it would now be worth around £118 for 2025.
The annual hike to state pensions will be applied in April 2026.
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