The Chancellor of the UK Rachel Reeves has confirmed that the State Pension will increase by 4.1% for the 2025/26 financial year under the Triple Lock. This state pension rise mechanism is aimed at helping pensioners keep up with inflation.
In other words, the State Pension automatically increases every year in accordance with the highest of the following: at least 2.5%, the Consumer Price Index (CPI) inflation rate (which was 1.7% in September), or average earnings growth (which is 4.1% this year). Pension payments from April will be significantly increased by the profit growth figure, which will determine the rise for the upcoming fiscal year.
Breakdown of the 4.1% Pension Increase
Starting from April 2023, the amount received by individuals on the full New State Pension will rise by £9.05. The annual increase, which adds £473.60 to total money, raises the figure from £11,502 to £11,973.
Meanwhile, recipients of the Basic State Pension will see weekly payments rise by £6.95, from £169.50 to £176.45, with the four-weekly payment reaching £705.80. Annually, this equates to an increase of £361.40, bringing their total to £9,175.
The current Labour Government has committed to maintaining the Triple Lock for at least the next five years. The projected annual increases are as follows:
- 2025/26: 4.1% confirmed (previous forecast: 4%)
- 2026/27 to 2029/30: Forecasted increase of 2.5% each year
Eligibility for Full Payments
Eligibility for the full State Pension amount is dependent on National Insurance (NI) Contributions. A recent analysis by Royal London found that about half of those on the New State Pension receive less than the full amount, with approximately 150,000 individuals on less than £100 per week.
Additional Pension Elements and Benefit Updates
According to September’s CPI, the New and Basic State Pension rates are the only increases verified by the Department for Work and Pensions (DWP). Other benefits and other components have also increased by 1.7%. It is anticipated that complete updated payment information for every benefit will be released soon.
Moreover, DWP will also send letters early next year to all 12.7 million State Pensioners informing them of their new payment rates. The letter will also remind pensioners to verify their eligibility for Pension Credit.
Tax Implications of the Pension Increase
No income tax is owed by pensioners whose only source of income is the State Pension because it is still less than the Personal Allowance threshold, which is set at £12,570 for 2025–2026. However, those who have other sources of income might have to pay taxes:
- Tax payments for those exceeding the threshold will be calculated in arrears, with HM Revenue and Customs (HMRC) sending any applicable tax bills in July 2026.
Pensioners can use the online forecasting tool on GOV.UK to estimate their future entitlements and prepare accordingly.
oh joy.. just means less people will qualify for Pension Credit and its perks and more people will pay more tax,,, give with one hand .. take with the other ….