The Department for Work and Pensions (DWP) state pension rates for 2027-28 are now projected to increase significantly, following the latest wage growth figures announced on Tuesday. The new state pension is on course to rise by £515 to £13,062 per year, while the basic state pension is set to increase by £395 to £10,010, according to analysis from Hargreaves Lansdown.
The projected increases stem from the triple lock mechanism, which annually raises the state pension by the highest of inflation, average wage growth, or 2.5 per cent. With inflation currently at 2.6 per cent and wage growth at 4.1 per cent, wage growth appears to be the decisive factor for the upcoming uprating.
Triple Lock Commitment Under Prime Minister Andy Burnham
The rise comes after Labour Prime Minister Andy Burnham, who succeeded Sir Keir Starmer in Number 10, reaffirmed his commitment to maintaining the triple lock. This policy ensures that pensioners receive a yearly increase that keeps pace with the cost of living or earnings growth, whichever is higher.
If the wage growth figure remains at a similar level next month, the basic state pension would rise from £9,615 to £10,010, and the new state pension from £12,547 to £13,062. This would provide pensioners with an additional £500 per year, offering some relief against rising costs.
Experts Weigh In on the Impact of the Increase
Caroline Abrahams, of Age UK, commented: “The triple lock is gradually pushing the state pension towards a level at which it will be enough to sustain a decent lifestyle in retirement, but we haven’t got there yet. Until we do, it remains an essential weapon in the battle against pensioner poverty.”
“Knowing that you haven’t really got enough money coming in, and with no prospect of this fundamentally changing, is miserable and frightening for older people, particularly for those living on their own, and it’s a far more common experience than is often assumed,” she added.
Helen Morrissey, of Hargreaves Lansdown, noted: “While an inflation-busting increase will be good news for pensioners, the fact remains that the state pension on its own does little more than cover the essentials.”
Tax Threshold Concerns Raised by Former Pensions Minister
Sir Steve Webb, a former pensions minister and now of consultants LCP, highlighted a potential issue: “Unless things change sharply in the next month, those on the new state pension can expect to see an increase of around £500 per year next April. But the sting in the tail is that this will take the standard rate of the new state pension above the tax threshold.”
“We therefore urgently need to know how the Government plans to fulfil its pledge to make sure that those wholly dependent on the new state pension will not be charged income tax next year,” he said.
The projected increases are set to take effect from April 2027, providing pensioners with a much-needed boost, but also raising questions about the interaction with income tax thresholds.
