The increase comes ahead of next Wednesday’s Autumn Budget, when Chancellor John Healey is expected to confirm pension payment rates and provide further details about income tax arrangements. The Government has also announced plans to remove the earnings element of the triple lock from 2030, raising questions about how pensions will increase in future years.
State Pension Payments Set To Rise by 3.9% From April 2027
According to the Daily Express, people receiving the full basic state pension are on course to see their weekly payments rise from £184.90 to £192.10. The increase follows the latest figures used to determine annual adjustments under the triple lock.
The system guarantees that state pensions increase each April by whichever is highest of three measures: inflation, average earnings growth or 2.5%. For the forthcoming adjustment, annual wage growth of 3.9% exceeds the other relevant measures.
Figures published by the Office for National Statistics showed that Consumer Prices Index inflation reached 3.5% in September, up from 3.1% in August. Earnings growth, measured between May and July, therefore remains the determining figure for the expected increase. The changes will affect recipients of both the old and new state pensions, although payment levels differ between the two systems.
The old state pension closed to new entrants in April 2016. People who reached state pension age before the change generally receive payments under the previous system, while those reaching pension age afterwards fall under the newer arrangements.
Under the expected increase, the full new state pension would rise from £241.30 to £250.70 a week. That represents an additional £9.40 weekly, or £488.80 over a full year, taking annual payments to approximately £13,036.40. For recipients of the full basic state pension, the corresponding increase is £7.20 a week. The figures refer to full standard payment rates rather than individual entitlements, which can differ.
Autumn Budget To Address Pension Taxation and Triple Lock Changes
The expected rise also brings the full new state pension above the frozen £12,570 personal income tax allowance. According to The Sun, the Government has pledged that pensioners whose only income comes from the full new or basic state pension, without increments, will not have to pay income tax on those payments.
The precise arrangements for delivering that commitment have not yet been explained. Further clarification is expected during Wednesday’s Budget.
Craig Rickman, personal finance editor at Interactive Investor, has questioned how the Government will define pension income without increments. He warned that additional state pension payments or increases resulting from deferred retirement could affect eligibility under the proposed arrangements. Another major issue concerns the future of the triple lock itself.
Prime Minister Andy Burnham announced plans to remove the earnings growth component from 2030, replacing the existing arrangement with increases based on inflation or 2.5%, whichever is higher. According to The Sun, the Government intends to use the resulting savings to help finance a National Care Service for older people.
The proposed change remains subject to the parliamentary process. The existing triple lock will therefore continue to determine the April 2027 increase, while the Budget is expected to provide further information about the Government’s longer-term pension policy.
