Chancellor Rachel Reeves is set to officially announce a significant financial uplift for millions of pensioners across the UK during the upcoming Budget.
The Triple Lock in Action
The confirmed increase of 4.8% is a direct result of the government's triple lock policy. This mechanism guarantees the state pension rises each year by the highest of three figures: average earnings growth, inflation as measured by the Consumer Prices Index (CPI), or 2.5%. This year, wage growth emerged as the dominant figure, dictating the rise.
The exact amount each pensioner receives depends on which state pension scheme they are on. Those who retired after April 2016 are on the new full state pension. For them, the weekly amount is set to increase by approximately £11.05, resulting in an annual boost of £575.
Two Tiers of Pension Increases
However, pensioners who retired before April 2016 and are on the older, basic state pension will see a slightly smaller increase. Their payments are due to rise by £440 per year.
While there is a notable gap of around £3,000 between the two annual pension rates, it is crucial to understand that those on the basic state pension often qualify for additional top-up payments, such as the Pension Credit. This means they are not necessarily worse off overall, though individual circumstances will vary.
Tax Implications and Expert Warnings
This welcome news for retirees comes with a potential future complication flagged by financial experts. The consistent above-inflation increases driven by the triple lock are pushing more pensioners towards the income tax threshold.
A spokesperson for Spencer Churchill Claims Advice commented on the trend, stating: "Pensioners can expect a slightly bigger uplift next year than initially predicted. While the difference may seem marginal, every pound matters when it comes to covering rising living costs."
The spokesperson added a significant warning: "If the triple lock remains in place, it is highly likely that by April 2027 the full state pension will actually surpass the personal allowance threshold. That would mean some pensioners paying income tax purely on their state pension, something the Government will find politically difficult to justify."
Chancellor Rachel Reeves will give the final confirmation of these new rates on Wednesday, November 26, with the increases taking effect from the start of the new tax year in April 2026.
