Millions of pensioners aged over 65 are set to receive a state pension bonus of £561 starting in April 2026, offering significant financial relief. This increase follows the latest wage data, which has revealed how the pension is adjusted under the government’s triple lock system. The triple lock guarantees that state pensions rise annually based on whichever is highest out of inflation, wage growth, or 2.5%.
According to BirminghamMail, the wage growth rate of 4.7% between May and July 2025 is expected to drive the upcoming increase in pensions. This system aims to protect pensioners from economic fluctuations, maintaining their purchasing power.
What is the Triple Lock?
The triple lock mechanism is designed to keep state pensions in line with the cost of living. It guarantees that pensions rise by whichever is highest among inflation, wage growth, or 2.5%. According to the most recent data from the Office for National Statistics (ONS), wage growth between May and July 2025 stood at 4.7%.
This figure will likely set the rate for the pension increase in 2026. As a result, the full state pension for those who retired after April 2016 is expected to rise to £12,534.60 per year. Meanwhile, the older basic state pension will increase to £9,607 per year.
How Will This Affect Pensioners’ Finances?
For many pensioners, this state pension bonus will offer a welcome relief, especially as the cost of living continues to rise. The £561 increase could help pensioners keep pace with inflation, particularly those who rely on their pension as their main source of income. However, there is an unintended consequence: the increase has also pushed more retirees closer to paying income tax.
This issue arises because of the frozen tax bands in the UK. Since 2021, the personal allowance, the income threshold above which individuals must pay income tax, has been stuck at £12,570. As pensions rise, more retirees will find themselves crossing this threshold and becoming liable for tax, even though their pension income may not have grown at the same rate as inflation.
Concerns Grow Over the Sustainability of the Triple Lock System
While the increase in the state pension is undoubtedly a positive for retirees, there is increasing concern about the sustainability of the triple lock system. Many economists have raised alarms, warning that the policy could become unsustainable in the future.
The concerns largely stem from the pressure the triple lock could place on government finances, especially if wage growth outpaces inflation or productivity. With an aging population, funding pension increases could become a growing burden on public finances.
Moreover, the triple lock ties pension increases directly to wage growth, which may not always reflect the broader economic context. As wage growth fluctuates, the system could place significant strain on the economy. These warnings from economists suggest that the policy may need to be reconsidered in the coming years.
