Younger people should be given the choice to take a year of their state pension early in exchange for working longer, a think tank has said, in a report that takes aim at intergenerational wealth unfairness.

The so-called ‘Citizens Advance’ would give people a choice – receive a lump sum now in exchange for postponing the point at which they start receiving their state pension.

Only those who had built up 10 years’ worth of National Insurance contributions would be eligible.

At the current full new state pension rate for a year, those using such a scheme could be given up to £12,547 decades before state pension age.

The proposal, put forward by think tank the Social Market Foundation and Andrew Lewin, the Labour MP for Welwyn Hatfield, highlights how family wealth levels can “alter the course of people’s lives”.

While only a third of adults expect to benefit from an inheritance, those who do will share in some estimated £5.5 trillion expected to be passed down by Baby Boomers in the “Great Wealth Transfer”.

“As the Great Wealth Transfer takes place, the sense of injustice around wealth inequality may only therefore increase without government action. Something has to give,” said the report’s authors.

Rachel Vahey, head of public policy at AJ Bell, said: “The obvious potential benefit to this particular proposal is it could deliver a much-needed cash boost at a time many people really need it, particularly if they’re trying to repay debt or save for a deposit on a first home.

“The downside is that in doing so they would have one year less of state pension income to rely on in later life.”

We look at how much you need for a comfortable retirement in a separate article.

Early state pension lump sum

Support for the policy suggestion was, perhaps unsurprisingly, strong among 25 to 40-year-olds, who might expect to be the key beneficiaries, according to the report, which surveyed 2,000 adults, did AI-led qualitative interviews with 300 respondents and carried out three focus groups.

Most in the 25 to 40 year old age group were in favour of a Citizens Advance, irrespective of whether they would take it, with 54% positive versus just 6% negative. The rest were ‘neutral’ on the idea.

A majority of this age group said they would take such an advance if it was offered, ranging from 50% to 70% depending on the value of the lump sum, length of state pension given up and restrictions on how it can be spent.

The SMF report suggested an early cash advance lump sum could help revive home ownership dreams among the young – with more than two-thirds of 18 to 40-year-old non-homeowners currently of the view property ownership is a dead idea for their generation.

But the report also finds over-indebtedness is increasingly widespread, and a lack of wealth is holding people back from starting a business or family – debt repayment was the most popular intended use of a Citizens Advance, chosen by 18% of respondents to an SMF survey.

People asked in the SMF survey also described the value of the policy in emotional terms, not just financial, calling it “empowering” and allowing them to take matters into their own hands.

What would an early state pension lump sum cost?

A policy to give a year of state pension early could be delivered for £1.3 billion in year one, depending on how eligibility is set, according to the SMF report.

The size of the lump sum, whether it is taxed, who is eligible and how it is rolled out could all affect how much the policy might cost.

An untaxed £12,500 Citizens Advance would cost an estimated £1.3 billion in its first year if it was only made available to those reaching 10 years of National Insurance credits and born from 1998 onwards – i.e. those turning 28 this year.

If it were implemented, only those who went straight into work would be able to claim the lump sum in year one of the policy, with others in the 1998 cohort becoming eligible in the following years depending on their post-18 educational pathways.

Modelling by the SMF suggests costs would grow towards £7 billion as all groups and younger cohorts become eligible and take the Citizen’s Advance over subsequent years, after which costs would increase in line with the state pension.

Costs would be higher, at least in the first few years, if the policy was made available to multiple age cohorts at once. It would take an estimated £27 billion in year one to offer the lump sum to 28 to 35-year-olds, for example, or over £45 billion for those up to 40.

Tax on proposed state pension lump sum

Annual costs are estimated to fall towards £8 billion a year over time as take-up becomes driven by those becoming newly eligible, according to the report.

Making the lump sum taxable would cut costs by a third, as would restricting it to people

earning under the higher income rate (£50,271). Limiting its uses, such as to housing only, is another way of bringing the upfront costs down.

Vahey from AJ Bell said: “A proposal along these lines would present cashflow challenges for the Exchequer, as it would need to pay the money out on demand to anyone who qualifies, whereas at the moment state pension entitlement only kicks in at state pension age.

“Even if early access was offered on the most conservative basis, this would amount to a rise in today’s government spending which would only be offset in decades, potentially creating pressure on the public finances at a time when they are already stretched to breaking point.”

The government is under growing pressure to reform the controversial triple lock on the state pension.

Set up under the Tory government in 2011, the triple lock is used to calculate how much the state pension should increase by each year.

Under the mechanism, the state pension increases annually by the highest out of average earnings, inflation or 2.5%.

It has become an expensive policy commitment though, sometimes rising above inflation due to high wage growth.

The Office for Budget Responsibility (OBR) has estimated that the triple lock will cost around £15.5 billion per year by 2029/30, which is three times more than originally forecast.

Critics warn that it creates a generational divide between pensioners and those still working, who do not benefit from increases of the same level.

Some groups, such as the Institute for Fiscal Studies, have even called for it to be scrapped.

Labour committed to maintaining the triple lock in its 2024 general election manifesto but the higher costs, ageing population and strained public finances mean there could be extra pressures to reform or scrap the policy.

Three separate reports in recent weeks, from the Tony Blair Institute for Global Change, the intergenerational foundation and the International Monetary Fund (IMF) have pushed for change, warning that the costs are becoming unsustainable.

Plenty of financial professionals agree that change is needed.

Martin Rayner, financial adviser at Compton Financial Services, said: “Welfare spending now exceeds income tax revenues and is still rising.

“At some point politicians have to decide whether they keep making promises or start dealing with reality.

“Reform is inevitable. Scrapping it outright would be politically toxic, but moving to a link based on earnings or inflation over a longer timeframe is far more likely.”

How could the state pension be reformed?

The government’s pension reforms may be more focused on getting people to save more for their retirement, but there is growing pressure to reform the state pension with lots of proposals raising alternatives to the triple lock.

The International Monetary Fund (IMF) this week warned the UK needs a “transparent public debate” on public spending and suggested reforms could include replacing the triple lock with a policy of indexing the state pension to the cost of living.

It comes as a report from the intergenerational foundation, Time to Unlock: Why it’s time to reform the triple lock on the State Pension, found that state pension spending has increased by almost 70% in real terms over the past two decades.

This year, the state pension is expected to cost around £146 billion, or around 5% of GDP, up from £86 billion in 2005/06, the report warns.

The think tank said its preferred reform would be to cap state pension increases at inflation until 2030/31 and then increase it by the average of inflation and earnings after that.

It said this would reduce the volatility associated with the triple lock while still preserving a link between pension increases and broader improvements in living standards.

This approach has also previously been recommended by the Organisation for Economic Co-operation and Development (OECD).

Perhaps the most extreme reform idea is from the Tony Blair Institute for Global Change, which has proposed totally replacing the current state pension with a new Lifespan Fund, which would effectively scrap the triple lock.

Instead of claiming the state pension once they've reached state pension age, people would build up credit in the fund through work and activities and can access it, for example if they need cashflow due to an unemployment spell of up to six months.

The think tank said this would only be permitted for those taking time out of work to “boost their future earnings potential or to engage in another socially useful activity”. This may include caring responsibilities.

Individuals would be able to choose when to retire and receive a personalised amount based on their age and life expectancy.

Its analysis suggests this could save the Treasury around £19 billion a year by 2035/36, rising to £38 billion a year by 2045/46. By the mid-2030s, that saving would be equivalent to almost £1,000 a year for every working household in Britain, according to the report.

Will the Labour government scrap the triple lock?

Scrapping the triple lock would be a pretty controversial decision, especially given Labour made a manifesto commitment to keep it.

But critics may argue that Labour also committed to not raising taxes, while some say it has scaled back commitments to leasehold reform.

There is a pretty big reason why Labour, or any government, won’t scrap the triple lock though.

Around a fifth of the population are of state pension age. That is a big part of the electorate to alienate if you reduce their future payments.

Research by AJ Bell shows that 38% of Brits believe the state pension triple lock should be made permanent, compared to just 6% who want it to be scrapped.

Unsurprisingly there is a significant generational divide, with more than two-thirds (68%) of ‘Baby Boomers’ angling for a permanent triple lock versus just 14% of Generation Z (aged 18-29) and 22% of Millennials (aged 30-45).

Tom Selby, director of public policy at AJ Bell, said: “The reason is almost certainly cold political calculus. A significant section of the public support the triple lock, particularly older voters, and any party indicating it will not pledge allegiance to the policy risks being annihilated at the general election.

“With inflation running hot, there may also be a feeling that the 2.5% underpin might not kick in for a while, meaning there are no guarantees ditching this element in favour of a ‘double-lock’ will actually save any money in the short term.”

Eamonn Prendergast, chartered financial adviser at Palantir Financial Planning, added: “It’s politically difficult to scrap — pensioners are a key voting group, but over the long term it becomes harder to justify in its current form. Reform is more likely than abolition, but any government that touches it risks a significant backlash.”

The government appears unlikely to budge for now.

Pensions minister Torsten Bell answered a parliamentary question at the end of April on state pension support where he reiterated the government’s commitment to the triple lock.

The bigger issue may be whether this government is able to make difficult decisions at all given potential leadership challenges.

Rayner, from Compton Financial Services, added: "Labour already appears politically paralysed, with every significant policy meeting backlash and a prompt U-turn. That makes meaningful reform harder, but delaying it simply means the eventual changes are likely to be far harsher."

An HM Treasury spokesperson said: “By keeping the triple lock, 12 million pensioners will see their income rise by up to £470 this year, and they continue to benefit from the highest personal allowance in the G7.”

A spokesperson for the Department for Work and Pensions said: "Supporting pensioners is a priority and our commitment to the triple lock for the rest of this Parliament means millions of pensioners will see their yearly state pension rise by up to £2,100.”

The “vast majority” of pensioners will miss out on the government’s plans for an income tax exemption from next year, new research suggests.

In the 2025 Budget, chancellor Rachel Reeves announced pensioners whose sole income is the basic or new state pension would not need to pay the “small amounts” of tax via simple assessment if the state pension exceeds the tax-free personal allowance from 2027/28.

It was positioned as easing the “administrative burden” but the government has since clarified pensioners in this situation won’t have to pay income tax at all from 2027/28, if their pension exceeds the personal allowance from that point

It came as the chancellor announced the allowance would be frozen at £12,570 until at least April 2031. The threshold last increased in April 2021.

This proposed waiver is intended to stop pensioners solely reliant on the state pension (with no other taxable income or pension ‘increments’) having to pay tax on the payment.

Only around 5.5 million pensioners – or just one in 18 – will be eligible for the concessions, former pensions minister Sir Steve Webb, a partner at pensions consultancy LCP, said.

The full new state pension of £12,548 sits just £22 below the tax threshold and the government expects the rate from next April to rise above the threshold for the first time, given high inflation, wage growth and the triple lock.

The old state pension, by comparison, is much lower than the threshold and even with expected rises looks set to remain so, meaning people solely on the old state pension would not have to pay income tax anyway.

How will the government proposals affect different groups of pensioners?

Webb has called the disparity of treatment between groups of pensioners under the proposed scheme “bizarre”, as LCP’s research flags how few people will actually benefit from the move.

The firm’s new report, ‘The tax treatment of state pensioners’ highlights that anyone who reached pension age before 2016 – when the flat-rate, single tier system replaced the two-tier system of basic plus additional state pension (SERPS or S2P) – will not benefit.

LCP said based on current data for 2025/26, none of the 8.1 million pensioners in the old state pension system will qualify for the exemption. This is either because they are only receiving the old state pension, which at £9,614 a year currently falls below the income tax threshold anyway or – in the case of 6.5 million of them – because they also receive additional state pension (either under SERPS or state second pension) and therefore are receiving a pension “increment” on top of the basic payment.

Similarly, most of the five million people on the new state pension (anyone hitting retirement age after 2016) may also miss out.

The firm calculated that 290,000 are not based in the UK; one million receive pension ‘increments’ or protected payments; 1.1 million have a new state pension rate that will remain below the income tax threshold in the next three years; and 1.8 million have other taxable income, such as private pensions or investment income so they are not solely dependent on the state.

Using the Office for Budget Responsibility (OBR) outlook, LCP calculated the estimated tax levels due over the remaining tax years (under this Parliament), assuming the state pension will rise by 3.7% in April 2027 and then by at least 2.5% in April 2028 and 2029.

Webb said the outlook presents some potential “cliff edges”, pushing people with even £1 of other income into a very different tax position than those without.

He said: “Someone who qualifies for this tax break in 2027/28 does not have to pay tax but someone who just misses out because of £1 of other income… will have to pay income tax not just on the £1 but also on the income tax on their state pension – a further £88. Over time this cliff edge will increase, to £153 in 2028/29 to £220 in 2029/30.”

The table below shows how much income tax would be payable without the proposed concession, for someone solely dependent on the new state pension.

Source: LCP, calculations based on the OBR’s March 2026 Economic and Fiscal Outlook for April 2027/28, then assumes a minimum increase of 2.5%.

Webb gives the example of someone with a small pension pot under auto-enrolment who cashes it out at retirement, therefore taking some taxable income and no longer being classed as solely dependent on the state.

Speaking to MoneyWeek, he said the government’s reference to the old basic state pension might be perceived as an even-handed benefit, whereas it was more of a red herring.

He said: “Freezing tax thresholds for a year or two is manageable. Freezing them for nearly a decade creates more unintended consequences by making a structural shift to the tax system in a ‘back-door’ fashion that isn’t fully thought through.

“Instead, we need a fundamental ‘root-and-branch’ review of the system – why we have tax thresholds in the first place, whether we should have the same rates for pensioners as for working people and so on.”

What are some alternative ideas to the new tax concession for pensioners soley getting the state pension?

He said he appreciates this is being presented as a short-term fix to the end of the current Parliament and is suggesting two potentially ‘cleaner’ solutions.

One option, albeit more expensive than the current proposal, is a broad-brush increase in the tax allowance for all pensioners.

Webb added: “But this would come at a considerable cost because it would also benefit the eight-million-plus pensioners already paying tax. This would not be a targeted solution to the problem.”

He also suggested writing off all small tax bills for pensioners, which would be a cheaper, more targeted option focused on the group of most concern. It would also not discriminate between those on the old and new tax systems.

“But it would still be only a temporary fix and would still leave any future government with a headache as to how to tackle the growing cost of such a measure.”

Webb added that the government already has a line at which it writes off small tax bills but it’s just less well-documented.

“I'm pretty sure HMRC doesn’t send out self assessment demand letters for amounts of £4. It’s taxpayers’ money and why shouldn’t that be paid? We know they clearly have a line already, all I'm saying is just make it bigger.”

LCP also warns the policy presents potential problems for the next government as any write-offs get more expensive over time.

Webb said: “By 2029/30 it looks as though the pensioners who do benefit will have over £200 per year in income tax written off. If the policy continues into the next Parliament it will get more and more expensive with every passing year, but will be hard to switch off – a bit like the triple lock.”

A HM Treasury spokesperson said: “Pensioners whose only income is the basic or new state pension, without any increments, will not have to pay income tax over this Parliament. “

A think tank led by former UK prime minister Tony Blair has called for the current state pension to be ditched and replaced with a new flexible fund from 2030.

The Tony Blair Institute for Global Change has proposed introducing a “Lifespan Fund” from the end of the decade. The suggested reform would see the triple lock, used to uprate the UK state pension at a great cost to the government, scrapped.

It comes as the number of people aged over state pension age is set to rise from 12.6 million in 2026 to over 18 million by 2070, taking the cost of the state pension from 5% of GDP now to 7.7% by 2070, according to the Office for Budget Responsibility (OBR).

State pension reform: What is the Tony Blair Institute for Global Change proposing?

Under the think tank’s proposals, individuals would build up credit through work and other activities. They would have the option of drawing on it during their working life, for example if they need cashflow due to an unemployment spell of up to six months, or if they have had to take on caring responsibilities.

The report says this would only be permitted for those taking time out of work to “boost their future earnings potential or to engage in another socially useful activity”.

Individuals would be able to pay a higher contribution rate after returning to work to ensure their eventual entitlement was enough to live on.

The report also suggests scrapping the state pension age and replacing it with a system where individuals could choose when to retire and receive a personalised amount based on their age and life expectancy.

That said, access to funds would only be possible if an individual had built up enough credit to ensure their pot would last at least 10 years.

The think tank says this would mean those with shorter life expectancies, often on low incomes, could draw on the income from their fund sooner.

The proposals also put forward the idea of getting rid of the triple lock and uprating payments in line with average earnings.

Calculations by the Tony Blair Institute for Global Change suggest the Lifespan Fund would significantly lower the burden on the public purse.

They estimate the new fund would cost 5.31% as a share of GDP by 2073/74 compared to 7.65% if the current state pension system stayed in place.

New Lifespan Fund would be a ‘huge backward step’

Steve Webb, former pensions minister and now partner at pension firm LCP, has raised concerns over the proposals.

He said: “We have just created a new state pension system which is relatively simple and standardised, and which forms a firm basis for retirement planning.

“It would be a huge backward step to replace it with something fiendishly complex and highly intrusive, and which would take many decades to implement in full.”

Webb, who was pensions minister when the triple lock was introduced in 2011, added the idea of linking state pension payments to individual health records and life expectancy was “deeply troubling”.

“Leaving aside issues of confidentiality and data quality, it is very hard to make a precise leap from health records to life expectancy,” he said.

“The report says that they would not want to pay higher pensions to those who had poorer health because of lifestyle choices such as smoking, but it is very hard to see how they would exclude the impact of smoking on someone's overall health.”

Tom Selby, director of public policy at investment platform AJ Bell, echoed Webb’s comments, saying an overhaul of the state pension “could create even more uncertainty as well as complexity”.

“The most radical ideas, like setting incomes based on personalised life expectancy and health data, will surely never get off the ground,” he said.

However, Selby said the report could be “a decent guide to future policy thinking”, including that the triple lock needed to be scrapped.

He said moving to uprating payments in line with earnings “feels a reasonable compromise”, while allowing people to take state pension income at a younger age “isn’t completely inconceivable".

We look at the alternatives to the triple lock in another article.

What is the state pension triple lock?

The state pension triple lock is the promise that the UK's state pension will always rise each year at least in line with the higher of inflation, average wage growth or 2.5%. It's a win-win-win for state pensioners – they always get the highest of the three “locks” – if not for taxpayers. The idea was to address pensioner poverty. From the 1980s to the 2000s, the state pension rose solely in line with price inflation, and in an age of decent wage growth, that meant pensions fell well behind earnings (from 26% of the average wage to just 16% by the 2000s). In 2011, the pension triple lock was introduced to slowly steer state pensions back into line with rises in national living standards.

Has the pension triple lock worked?

Broadly, yes. The state pension triple lock has nudged up the real value of pensions to the point where they are a decent safety net for low earners and a good base for the better-off. It now sits at £241.30 per week (for those qualifying since 2016; or £184.90 for those on the previous system). Since 2011, state pensions have risen 89% in nominal terms. If they'd risen solely in line with inflation, they'd have gone up only 60%, or 66% if in line with wage growth. The UK's (new) state pension of £12,548 a year is not generous compared with some, but it has done its job in helping the state pension keep up with earnings. It is now about 30% of full-time median earnings.

Is the state pension triple lock good for pensioners?

Indeed yes, and not just for the poorest. If a 66-year-old wanted an annuity escalating at 2.5% to 5% a year – a proxy for the pension triple lock – it would cost £215,000-£283,000, says Jonathan Guthrie in the Financial Times. By comparison, the median level of private pension wealth in the 65-74 age band is £146,000. It's unsurprising that the state pension accounts for the bulk of poorer pensioners' income. And only 12% of households rely solely on the state pension. But the really striking thing, says Guthrie, is that even among the richest fifth of UK pensioners, it accounts for almost 30% of single incomes and 16% for couples after housing costs. It's not just nice to have, it's a basic plank of retirement planning for all but the properly wealthy.

How secure is the pension triple lock?

The government has wriggled out of the pension triple lock only once. After the Covid-19 pandemic, as the furlough scheme unwound and employment jumped, average wage growth was 8.4%, dwarfing the CPI level of 3.1%. Few people begrudged the government's decision to simply pause the lock that year and use inflation instead due to the exceptional circumstances. The following year, though, there was an almost equally massive differential again, but this time the other way round – and the government didn't intervene. In 2022 the post-pandemic inflationary shock was at its height, and in April 2023 pensioners enjoyed a hefty 10.1% rise when wage growth was at 5.4%. It is this kind of exceptional year that has had a disproportionate impact on the fiscal impact of the triple-lock policy – and makes it unsustainable in the long run.

Is the pension triple lock sustainable?

According to the Office for Budget Responsibility, the pension triple lock has pushed up spending on the state pension so that it now costs the government £12 billion more each year (and rising to £15.5 billion by 2030) compared with uprating solely in line with average earnings. Overall, the state pension costs an estimated £146 billion a year in 2025, according to the Institute for Fiscal Studies, which reckons the triple lock could see that grow by another £40 billion annually (in today's terms) by 2050. That matters not just from a budgetary point of view, but in terms of long-term planning as the retired cohort grows and the working-age population shrinks. The cost of the basic state pension, currently 5% of GDP, is set to rise to 8% to 10% over the next four decades. The volatility of the current regime is “insane”, says Tom Calver in The Sunday Times – making it impossible for policymakers to project the true long-term cost.

Why hasn't the pension triple lock been scrapped already?

A bit like the winter-fuel allowance (1997), or inheritance-tax relief on pension pots (2015), the pension triple lock has assumed such totemic significance in the national discourse that one might think it was a permanent feature of the British constitution. Politicians know that it's fiscally unsustainable and admit as much once they are safely out of office. But they are scared of fiddling with it because they fear the backlash from the people most likely to vote – pensioners. Reform UK, which had pledged to abolish it on grounds of fiscal sustainability, recently U-turned, bringing them into line with Labour, Tories and Lib Dems. Oddly, it is only the Greens – the party of fiscal incontinence and wishful thinking – who have a modestly sensible policy of ending the lock (by dropping the 2.5% bit). It's no coincidence that the left-populist party is overwhelmingly supported by young voters and rarely by the elderly.

What is the future of the pension triple lock?

Raising the pension age is one way of cutting costs, but is contentious. The loss of a year of state pension is a huge deal if you are poor with a lower life expectancy, while rich people are left (if they are lucky) to enjoy an indexed state pension into their 90s. Another idea, means-testing indexation, would be technically very complex. So a more likely reform would be either a double-lock to the higher of earnings or inflation or a simple link to earnings. Heidi Karjalainen of the IFS proposes an Australian-style “smoothed earnings link”, where the government sets a permanent target level for the pension as a share of average earnings. The pension is then uprated each year by whichever measure that keeps it on track to hit that proportion. Whatever happens, state pensions will be less generous in future so invest what you can and “rely on the state as little as possible”, says Guthrie. “It is big, clumsy and it cares a lot less about your financial wellbeing than you do.”

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The introduction of a scheme to protect the National Insurance records of people, mainly mothers, who might otherwise lose out when it comes to their state pension has been delayed, the government has announced today (30 March).

The delay has been condemned as “deeply frustrating” by Steve Webb, a former pension minister and now partner at pension consultancy LCP.

The issue relates to the impact of the introduction of the High Income Child Benefit Charge (HICBC) in 2013, which aims to claw back Child Benefit from higher earners. Parents – mostly mothers – can still claim Child Benefit, regardless of the charge, but if they or a partner has an individual income above the threshold, they face a tax bill which may wipe out the value of the Child Benefit.

After HICBC was introduced, hundreds of thousands of parents reacted by simply not claiming the benefit.

However this created a new problem – not claiming Child Benefit also meant not getting a valuable ‘National Insurance credit’ for anyone with a child under 12. These credits help to protect the state pension record of those who are at home raising children.

Another problem was that although parents who later realised they might miss out could make a Child Benefit claim (but ask for the National Insurance credits and not the cash benefit), such claims could only be backdated for three months. This meant they could still have years missing on their National Insurance record.

To sort out the issue, in April 2023 the Conservative government under then prime minister Rishi Sunak promised to create a system where parents in this position could be awarded ‘replacement credits’. This system was due to come into force from April 2026.

However the government has announced a delay of one year in the introduction of this scheme, which is now due to open in April 2027.

Who will be affected by the delay to the “replacement credits” system?

Those who won’t reach state pension age until after April 2027 should not be affected – provided they had not inadvertently paid voluntary National Insurance contributions for the ‘missing’ years.

But, Webb pointed out, the delay will be especially frustrating for those who have already reached state pension age or will do so shortly, and may get less in state pension than they are due. In response, HMRC has said people who have lost out, in terms of reduced state pension, may be able to claim financial assistance.

Webb from LCP said: “It is deeply frustrating to see a delay in a scheme designed to unpick a mess in the pension system. When the High Income Child Benefit Charge was introduced in 2013, some parents – mostly mothers – decided it wasn’t worth bothering to claim Child Benefit, only for them or a partner to get a tax bill for the same amount. But by not claiming Child Benefit they also threw away valuable National Insurance credits towards the state pension.

“The government promised several years ago to fix this problem by creating ‘replacement credits’, but now we hear – just a few weeks before the new system was about to be introduced – that it has been delayed by a year. The whole thing has been a mess from the start.”

An HMRC spokesperson told MoneyWeek: “We can reassure parents and carers that when the service launches in April 2027, they will still be able to claim credits going back to January 2013, meaning no one will miss out on them.

“Because those who benefit from the service will be families with children under the age of 12 since 2013, we expect very few to have reached state pension age by this April.”

What are the current High Income Child Benefit Charge rules?

Since 2024/25, if you or your partner earn more than £60,000 per year, you will be affected by the High Income Child Benefit Charge. You’ll pay 1% of the Child Benefit back for every £200 you earn over the threshold.

This means if you or your partner earns £80,000 or more, you’ll repay all of the Child Benefit through the tax. Affected parents can opt out of Child Benefit payments. This means you are still registered for Child Benefit but don't get paid the money – letting you avoid having to pay the tax charge but still receive National Insurance credits.

Previously, if you or your partner earned more than £50,000 per year, you'd have to pay some of your Child Benefit back. It would be lost entirely to the tax if you or your partner's income was £60,000 or more.

The state pension is meant to be straightforward: if you've made at least 35 years of national-insurance contributions, you'll qualify for the full amount of the benefit, currently worth £230.25 a week. However, hundreds of thousands of people are discovering that this often isn't true – they're in line to receive less than the full amount because of how they saved for retirement decades ago.

The confusion stems from a major shake-up of the state pension that took effect in 2016. Before the changes, many people were entitled to two types of retirement benefit from the state – the basic state pension and an additional payment related to their earnings, earned through the State Earnings Related Pension Scheme (Serps) or the State Second Pension (S2P). Now, anyone reaching state pension age after 6 April 2016 receives this benefit. But when Serps and S2P were still running, working people had the option of “contracting out” of these schemes via a private pension. They paid less national insurance, with cash rebated into private pensions.

Contracted out? You may not qualify for the full state pension

You may have actively chosen to contract out via an individual plan such as a stakeholder or personal pension. Or, you may have been contracted out automatically through your workplace pension scheme – many employers, particularly in the public sector, did this as a matter of course. Either way, your national-insurance contributions record will have been affected. And because you contracted out, you may not have enough full years of contributions to qualify for the full amount of the state pension.

The first step is to get a state pension forecast – you can do this online at the gov.uk site. If you're not on track for the full amount, despite working throughout your adult years, or receiving national-insurance credits for periods of caring, there's a good chance it's because you were contracted out for a period. You may have no memory of this – information on contracting out was often buried in the small print.

You haven't necessarily lost out. Those rebates were channelled into your private pension, which you'll be entitled to claim when you retire. The income that the rebates will generate may well be worth more than what you're missing out on from the state pension. However, that assumes you've stayed on top of your pensions. Many people have lost touch with savings they built up many years ago. It's vital that you trace every pension you've contributed to, so that you claim all the income you're owed. Facilities such as the Pension Tracing Service, also at gov.uk, can help.

It may also be possible to top up your national insurance contributions so that you qualify for the full state pension on top of your private savings. You can't top up for the years in which you were contracted out – these count as full years since you were saving elsewhere – but if you have other missing years on your national insurance record, you can replace these.

In theory, you can buy up to six years' worth of additional national insurance contributions; the cost of doing so varies according to which specific years you're buying back. Doing so could boost your state pension by several hundred pounds each year. However, topping up doesn't make sense in all circumstances – you may need financial advice to help you crunch the numbers.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

One million more pensioners will need to pay income tax in 2031, a new forecast suggests, due to successive freezes to tax thresholds.

The number of pensioners paying income tax will rise by 600,000 to 9.3 million in 2026/27, according to the Office for Budget Responsibility (OBR), from an expected 8.7 million in 2025/26.

In 2030/31, one million extra pensioners will be dragged into the taxman’s net, based on the fiscal watchdog’s latest forecasts for the UK economy published alongside the Spring Statement on 3 March.

The jump comes as incomes rise, in part due to the state pension increasing under the triple lock, but tax thresholds remain frozen until 2031.

The OBR said many of the one million people who will be pulled into the tax net in 2031 will pay “very small additional amounts” to HMRC.

Meanwhile, the chancellor Rachel Reeves has said there will be a workaround for pensioners whose sole income comes from the state pension who are expected to pay income tax from 2027.

HM Treasury is expected to set out more detail on how this exemption will be administered later this year.

Why more pensioners are paying income tax

Pensioners have seen their state pension steadily rise under the triple lock mechanism since it came into effect in April 2011.

The mechanism sees the state pension increase by the highest figure out of 2.5%, inflation (CPI) or average earnings growth.

In April 2026, the state pension will rise by 4.8%. It means the full new state pension will increase from £230.25 a week now to £241.30 per week from April 2026.

However, the tax-free personal allowance (£12,570) and income tax thresholds have been frozen at their current levels since April 2021 and will remain there until 2031.

As people’s incomes increase, in part for pensioners because of a higher state pension, more of their money is liable for tax. The process is known as fiscal drag and has been described as a “stealth” tax as people slowly pay more tax as their incomes rise with inflation.

Around 8.3 million people of state pension age paid income tax in 2024/25, up from 5.9 million in 2011/12, according to the latest HMRC data.

How pensioners could reduce their tax bill

If you’re one of the millions of pensioners currently paying, or expected to pay, income tax on your income, there are ways to mitigate the blow.

Defer your state pension

One option is to defer your state pension. For every nine weeks you defer, your state pension is boosted by 1% when you come to actually claiming it. This is if you reached or will reach state pension age on or after 6 April 2026.

You have to defer for a minimum of nine weeks to get any top up.

Delaying taking your state pension can be useful for tax purposes if you are still working and claiming it were to take you over certain tax thresholds.

You could then claim it when you are no longer working and your taxable income is lower.

Just bear in mind that deferring your state pension can reduce the amount you receive from government benefits.

Use your tax-free cash wisely

You can take 25% of your private or workplace pension as a tax-free lump sum, capped at a maximum of £268,275, from the age of 55 (57 from April 2028).

But you don’t have to take it out all at once and can take it in chunks over time. For example, you could use it to supplement your taxable income meaning mean you pay less tax overall.

“You can use the tax-free cash from your pension to supplement your taxable income,” said Helen Morrissey, head of retirement analysis at investment platform Hargreaves Lansdown.

Make the most of ISAs

You could top up your taxable income with cash withdrawn tax-free from an ISA.

If you are still earning money and want to stash some away, it’s worth adding it into an ISA as well.

Money held within a taxable savings account is subject to the personal savings allowance (PSA) which sees you taxed on interest earned over certain thresholds. Basic-rate taxpayers can earn £1,000 in savings interest tax-free, while the allowance is £500 for higher rate taxpayers. Additional rate taxpayers don’t get a PSA.

Spread savings or investment income with a partner

You may be able to spread income from savings or investments between you and your partner to lower your overall tax bill. This is particularly helpful if one’s income is much higher than the other’s.

Adam Cole, retirement specialist at Quilter, said: “Couples can often reduce the overall bill by shifting savings or investment income towards the lower‑earning partner.”

One allowance you can utilise is the marriage allowance which lets you transfer £1,260 of your personal allowance to a higher-earning partner to reduce their tax bill.

To qualify, the lower earner must normally have income below the personal allowance and their spouse or civil partner must be a basic rate taxpayer.

Retirement income today is rarely generated from a single source. It is typically built from a combination of the state pension, workplace or personal pensions, and other assets, each playing a different role.

Understanding how these different pension and non-pension income streams work – and the risks attached to each – can help you approach retirement with clearer expectations, financial advisers say.

Middle-aged Brits are sleepwalking into retirement without a plan, and time is running out, a survey has warned. Retirement income options are not being considered by 73% of 45-60 year olds, according to the study by pension provider LV.

A third (33%) of respondents to the survey aged 45 to 60 said they are unaware of financial products or strategies available to help protect their retirement income or boost their pension savings.

Sue Allen, chartered financial planner at Chester Rose Financial Planning, said: “When you retire, one of the key questions is how you will take an income. Many people find they spend more at the start of retirement as they enjoy their newfound freedom and tick off bucket-list experiences.

“Once early retirement has passed, your spending may settle down, but you might also want to prepare for higher costs in your later years in case you need to pay for care. Setting out your retirement goals could help you understand how to create an income that suits your lifestyle at different points in time.”

We look at the different retirement income options – like the state pension, defined benefit pensions versus defined contribution pensions, workplace pension and SIPPs as well as annuities, cash savings accounts, ISAs and property rental income – and how they can work together to fund your later years.

State pension – a baseline income

The state pension provides a guaranteed, inflation-linked income for life and forms the baseline of retirement income for most people.

The full new state pension (for most post-2016 retirees) is now £230.25 per week for 2025/26, or £11,973 per year, while the full basic state pension (for those born before April 1953) is £176.45 weekly – amounting to £9,175.40 a year – both increased under the triple lock, with payments made every four weeks.

Eligibility and amounts depend heavily on National Insurance contributions, requiring 35 years for the full new state pension and around 30 for the basic. You can begin claiming the state pension at 66, but the state pension age is rising.

Jude Dawute, managing director at financial advice firm Benjamin House, said: “While it provides an important level of security, the state pension on its own is generally designed to meet basic living costs, rather than support a broader retirement lifestyle.”

Pensions UK, a trade body, estimates a single person household needs £13,400 a year post-tax income to cover the basics in retirement – excluding housing costs – so while most of this will be covered by the new state pension, some other savings or income will be needed besides.

We look at how much you need for a comfortable retirement in a separate article.

Defined benefit pensions – predictable income

Defined benefit (DB) pensions provide a pre-determined income for life, usually payable from a scheme’s normal retirement age (commonly 60 or 65). The income is not affected by market movements and continues for as long as you live. You can usually take 25% tax-free as a lump sum, with the rest of the income taxed at your marginal rate.

DB pensions are typically used to meet core, ongoing expenditure, because the income is known in advance and often includes inflation protection.

So if a person, aged 65, had a defined benefit pension paying £18,000 per year and gets the full new state pension of £11,973 per year, their total guaranteed retirement income would be £29,973 per year.

“This income would be paid regardless of investment conditions or how long the person lives, providing a stable base from which other retirement decisions could be made,” said Dawute.

Defined benefit pensions are usually inflexible regarding how income is taken and at what level. However, many allow a tax-free lump sum in exchange for lower income.

Allen, from Chester Rose Financial Planning, said: “The decision whether to take a tax-free lump sum or not needs careful consideration, as once taken, it cannot be reversed. In most cases, maximising guaranteed income is preferable unless the lump sum is genuinely required.”

Defined contribution pensions – flexibility and risk

Defined contribution pensions work differently to defined benefit pensions. Instead of providing a guaranteed income, they build up a pension pot, which can usually be accessed from age 55 (rising to 57), with no requirement to retire at a fixed age.

This flexibility allows income to be tailored to individual circumstances, but it also means retirees remain exposed to several risks.

“Unless funds are converted into guaranteed income – by buying an annuity – DC pensions remain invested. Their value can therefore rise or fall with markets,” Dawute said.

A key consideration is sequence risk, he pointed out. This is the impact of taking withdrawals during periods of poor market performance, particularly early in retirement.

Dawute said: “Losses at this stage can have a disproportionate effect on how long a pension pot lasts. Diversified portfolios can help manage volatility, but investment risk cannot be removed entirely.”

Consolidation, transfers and SIPPs

Many people reach retirement with multiple defined contribution pensions, built up over different jobs.

Consolidation brings these pensions together, often into a self-invested personal pension (SIPP) or a workplace pension scheme. This can make it easier to understand your overall retirement income, manage investments consistently, and plan withdrawals.

“In some cases, individuals may also explore pension transfers from older arrangements and defined benefit pensions into newer ones with greater flexibility,” said Dawute. But he added where protected benefits exist – like guaranteed income rates – these decisions require careful consideration.

Turning defined contribution pensions into income

Deciding how much to withdraw from your pension can seem like a balancing act and there are often many factors you need to consider.

Allen said: “For example, when you access your pension, you can usually take up to 25% as a tax-free lump sum. You might be tempted to withdraw the money to travel, renovate your home, or indulge your hobbies. However, withdrawing a lump sum at the start of retirement could affect your long-term finances.

“You don’t have to take a lump sum at the start of retirement to benefit from the tax-free money – you may spread it out over several withdrawals, for instance,” she said.

Option 1: Flexi-access drawdown – adaptable income with market exposure

Drawdown allows pension funds to remain invested while income is taken as needed. It is often used to support discretionary spending, such as travel or irregular expenses, and to keep funds accessible. You typically take your 25% tax-free cash upfront.

Drawdown income is not guaranteed and is exposed to:

• Market volatility
• Inflation risk if withdrawals rise faster than investment growth
• Longevity risk if withdrawals continue for longer than expected

When you are in drawdown the sequence of your investment returns is of vital importance. In the scenario shown below, which shows a retiree with a portfolio of £100,000, taking annual withdrawals of £5,000, their portfolio could be 22% worse off if they experienced losses in the first two years of retirement, compared to having these same losses in years four and five.

Source: Quilter. Table shows a 22% difference between portfolio 1 and portfolio 2 after five years

Option 2: UFPLS – simplicity and tax considerations

Uncrystallised funds pension lump sums (UFPLS) allow individuals to take payments directly from their pension, with 25% tax-free and 75% taxed as income each time, unlike flexi-access drawdown where the whole tax-free amount is usually taken upfront.

It's a way to get money bit-by-bit without setting up a full drawdown plan or triggering the money purchase annual allowance (MPAA) on the first withdrawal and allowing the rest of your fund to keep growing.

UFPLS is commonly used for:

• One-off expenses
• Early retirement bridging until the state pension or other retirement income kicks in
• Smaller pension pots

Dawute said: “Because each withdrawal is taxed, timing and frequency can significantly affect your overall tax position.”

Option 3: Annuities – guaranteed income and annuity risk

An annuity converts pension savings into a guaranteed income, usually payable for life.

People often use annuities to cover essential spending, reducing reliance on investment markets and removing the risk of outliving their savings.

“However, annuities involve annuity risk – once an annuity is purchased, the income is typically fixed based on market conditions at that time and cannot be changed later,” said Dawute.

Inflation risk and annuities:

• Level annuities start at a higher income but lose purchasing power over time
• Inflation-linked annuities protect real income but begin at a lower level. This reflects a trade-off between higher initial income and longer-term protection against rising prices.

Other sources of retirement income

Drawing income from a range of assets can help diversify risk and improve financial resilience in retirement.

Matt Finch, director of wealth management at Bentley Reid, pointed to some non-pension assets that can boost your retirement income:

ISAs

“ISAs offer highly tax-efficient income, with withdrawals, income and growth free from tax. In many cases, it can be advantageous to utilise taxable income first to maximise allowances before drawing on ISA wealth,” said Finch.

Cash

Cash savings can provide liquidity and short-term security, reducing the need to sell long-term investments during periods of market volatility, he said.

Rental property income

Finch said: “Rental income can continue to provide a steady income stream in retirement, although it remains taxable and carries ongoing management responsibilities, which should be considered in the context of lifestyle objectives.”

Part-time work

“Part-time or consultancy work can offer a phased transition into retirement, maintaining income and reducing reliance on pensions in the early years,” he added.

Combining pension income streams

The most effective retirement income plans combine guaranteed income, flexible withdrawals and long-term growth, according to the experts.

Chartered financial planner Sue Allen said: “They are built around spending needs, health and attitude to risk – and are reviewed regularly as circumstances and tax rules change. Retirement income planning is not about finding the perfect product. It is about structuring your money so it supports the life you want for as long as you need it.”

A 65-year-old with a full state pension, NHS pension, a SIPP valued at £400,000 and an ISA of £100,000, who is continuing to work until 67, could have a retirement income portfolio that looks something like the below, she said.

In early retirement, income is topped up from the SIPP and ISA to support higher spending. Once the state pension and NHS pension payments begin, reliance on the SIPP reduces.

Later in life, income needs decline further, and guaranteed income covers most spending, while modest withdrawals continue to provide flexibility.

“The aim is not to maximise income early on but to keep the income sustainable and tax-efficient,” Allen said.

A quarter of a million more 60 to 64-year-olds are now in relative income poverty compared to 2010 when the state pension age began rising, according to new analysis, provoking hard questions for the government about the impact of further increases.

There has been a marked jump in financial insecurity among people in their early 60s as the state pension age has been pushed higher over the past 15 years, the report from the Standard Life Centre for the Future of Retirement found.

The poverty rate for 60 to 64-year-olds has increased from 16% in 2009/10 to 22% in 2023/24, according to the research.

Meanwhile, when the state pension age rose from 65 to 66 between December 2018 and October 2020, the percentage of 65-year-olds in income poverty more than doubled from 10% to 24%.

Further raises are likely to have the same impact unless changes are made, the report’s authors said.

Patrick Thomson, head of research analysis and policy at the Standard Life Centre for the Future of Retirement, said: “For the first 60 years of its existence the state pension age stayed the same. Since 2010 it has been rising in more years than not, and a growing number of people are falling into poverty as they wait for a higher state pension age.

“Next year we will begin to see another rise from 66 to 67 which will save £10 billion a year but have knock-on costs and consequences for poverty levels.”

We look at how much you need for a comfortable retirement in a separate article.

State pension age will rise from April

The next rise in state pension age kicks in from April 2026, gradually reaching 67 for both men and women by 2028.

This relatively fast increase in state pension age since 2010 has happened at the same time as big demographic change. There are now 8 million people in the UK in their 60s, up from 6.7 million in 2010, and this is expected to peak at 8.7 million in 2031, according to the report’s analysis.

Within this large cohort, pre-retirement poverty is predicted to rise further as the state pension age begins to increase again next year. Thomson said: “The change will come at a huge cost to some.”

He added: “Our research with the public shows that most people accept that the state pension age may need to rise over time, but this needs to be done in a way that is seen as fair between generations.

“Any further increases must be matched by clear policies to help people stay in good work for longer and protect those who cannot,” he said, warning, otherwise, more people could face a long period of financial insecurity before receiving the state pension.

State pension age hikes leave some people working for longer

Many people have responded to a later state pension age by working for longer.

The report finds the employment rate for 64-year-olds has risen from 34% in 2013 to 54% today. But this is largely among people who were already in work.

Those who leave the labour market in their 50s and early 60s remain unlikely to return, increasing their risk of low income, the report found.

Meanwhile latest figures out today showed UK unemployment has hit its highest level in almost five years.

Will the state pension age go higher?

The government is currently engaged in a State Pension Age Review, to gauge any future increases in the age at which people can receive the benefit.

It has also revived the Pensions Commission in a bid to tackle the “retirement crisis that risks tomorrow's pensioners being poorer than today's”. It warns that too many working-age adults (45%) save nothing at all into a pension.

But increasing the state pension age when people are already undersaving for retirement will do little to improve pensioner poverty.

Standard Life is calling on the government to redirect some of the savings from the state pension age rises into policies focused on helping people to work for longer, allowing them to save more for retirement.

The report also recommends providing better support to people to help them make good decisions when it’s time to access their pension savings. In combination these policies could help both individuals and contribute higher economic activity and tax revenue, the report said.

Thomson said: “We know that there is a good chance that 66 year olds will see their rates of poverty double over the next few years unless we take action.

“We will spend £10 billion less on them each year [because of the state pension age rises], and could target some of that to help people to stay in good work in their 60s and to cushion the impact on those most at risk.

“The state pension matters to people, and we need to build public confidence in a fair system for today and for tomorrow”.

Could you benefit from a pension review?

Relying on the state pension alone is not typically enough to fund a retirement.

Outside increasingly rare defined benefit pensions, private pensions like a SIPP or workplace pension remain the most tax-efficient way to build a bigger retirement pot, despite constant tweaks by successive governments. Contributions attract tax relief at your marginal rate, and investments grow free from income tax and capital gains tax – though withdrawals are taxable.

Basic-rate taxpayers receive 20% relief on contributions, rising to 40% for the higher-rate, and 45% for the additional-rate, making pensions a powerful tool to turbocharge retirement savings.

An annual pension review can be the wake-up call needed to get retirement plans on track, whether you do it yourself or seek professional advice.

Take full advantage of employer perks such as higher employer matching or salary sacrifice schemes, which remain highly tax-efficient but the amount that is exempt from National Insurance contributions will be capped at £2,000 from April 2029.

Don’t forget ‘carry forward’ rules to use unused pension allowances from the past three tax years. This means a large bonus or inheritance, for example, might allow you to make contributions well above the £60,000 annual allowance – but only if you have relevant earnings that at least cover the total pension contribution.

If all carry forward allowances were available, the highest earners could potentially pay up to £220,000 into a pension this tax year.

Finally, review your investment mix and risk level to ensure they still suit your goals.

And so it goes on. The government is to reconsider its decision not to compensate women hit by changes to the state-pension age. Liz Kendall, the work and pensions secretary at the time who made that decision, was apparently not given access to all the evidence she should have reviewed before rejecting a recommendation from the Parliamentary and Health Service Ombudsman (PHSO) to pay compensation of up to £10.5 billion to 3.6 million women born in the 1950s.

Let us hope that Pat McFadden, Kendall’s successor at the Department for Work and Pensions (DWP), upholds her original decision. Many people will instinctively sympathise with a group of older women, some of whom are struggling to get by on low incomes. But the emotional response is the wrong one. The facts of this case do not support a huge compensation payout that would put further pressure on the public finances.

For more than 10 years, Women Against State Pension Inequality (Waspi) has campaigned loudly on behalf of women affected by the policies – including how they were implemented – of successive governments. Waspi has explored every possible legal avenue to redress, kept this issue in the public eye, and at one stage even persuaded the Jeremy Corbyn-led Labour Party to promise a £58 billion windfall.

Ultimately, however, Waspi’s campaign has come up short because its arguments are unconvincing and short on evidence. Payouts are simply not justified in this case. For one thing, it has not always been clear what Waspi wanted. In the early years of its campaign, the group attacked the decision to equalise the state pension age for men and women. We were told women had been promised they could claim their state pension from age 60: they were being “robbed”, despite faithfully paying national-insurance contributions for decades.

Those complaints were always nonsense. The decision to raise the state-pension age for women was made by a democratically elected government in 1995 and agreed in Parliament. It reflected the complete transformation of the labour market since the 1940s, when the state pension was first introduced, as well as the cost of paying these benefits. MPs also noted women’s longer average life expectancies.

Should Waspi women be compensated?

Besides, National Insurance contributions have never gone into a dedicated fund to pay pensions. Women were no more robbed than millions of men who started work at a time when the state pension age was 65 but are now having to wait until 66, 67 or even longer to claim, because governments have also decided to raise the now-equalised state pension age.

To be fair, Waspi’s case has shifted in recent times. It now accepts the government of the day has the right to make pension reforms. But it argues that after 1995, too little was done to ensure women affected by equalisation knew what was going to happen – and that as a result, many women suffered hardship they might have avoided if they’d been able to plan ahead. The impact of that failure was compounded in 2010 when the government decided to speed up equalisation, Waspi adds.

Such complaints appear to have been accepted by the PHSO. In 2024, it found the DWP guilty of maladministration after an investigation of the department’s efforts to make women aware of the pending changes to their state-pension rights. Eventually, the ombudsman recommended payments of between £1,000 and £2,950 for all those affected.

However, the maladministration finding refers to a very short window of time. In 2004, the DWP found that the message about equalisation wasn’t getting through to some women. Officials realised they needed to do more, including writing directly to those women, but various failures meant this didn’t happen until 2009. Without those failures, the PHSO concluded, women would have received letters from the DWP 28 months earlier – and thus had more time to act.

This is the straw at which Waspi has been clutching. Its leaders are delighted by the announcement of a fresh look at the decision not to compensate women for 28 months of maladministration. Their reaction is understandable, but Kendall made the right choice – and McFadden should stick with it. The PHSO’s suggested compensation scheme is an extraordinarily blunt and hugely costly response to a minor injustice: an unaffordable sledgehammer to crack a nut.

And it is a minor injustice. That short period of maladministration adversely affected only a small number of women. Research between 2004 and 2009 found that most women knew the state-pension age was rising and many realised they would be affected. But awareness wasn’t spreading fast enough. So of the 3.6 million women potentially caused problems by maladministration, only a minority were actually affected. Many in that much smaller group may not have been able to do much in any case. They were often poorly paid and lacked access to other resources.

Critically, the PHSO suggested paying a flat rate of compensation to all 3.6 million women as it would be impossible to work out which women knew what 20 years ago. The ombudsman was effectively arguing that since there was no way to work out who ended up genuinely worse off because of the DWP’s maladministration, everyone should get a payout.

That feels utterly disproportionate. It can’t be right to ask the taxpayer to foot the bill for payments to large numbers of women who didn’t suffer maladministration and, in many cases, don’t need the money. Unless the evidence Kendall apparently wasn’t shown turns out to be a bombshell gamechanger, McFadden should uphold her decision.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Pensioners whose sole income comes from the state pension will be exempt from paying income tax on it until the end of this parliament, chancellor Rachel Reeves has said.

The full new state pension is expected to rise to at least £12,862 from April 2027, under the triple lock mechanism.

It will increase from £11,973 a year now to £12,547 from April 2026, due to wages rising at 4.8%, then by a minimum of 2.5% the following April, taking it to at least £12,862.

Someone in this position, purely on the state pension, would then breach the personal allowance threshold, which is frozen at £12,570 until 2031. Ordinarily, they would face a tax bill of around £58.

However, the chancellor has now confirmed that HMRC will not collect tax for people in this situation in 2027/28 and the following two financial years.

This would typically be collected by simple assessment, but the government said in the 2025 Autumn Budget that people whose sole income is the basic or new state pension without any increments would not need to pay “small amounts of tax” via this mechanism. More detail will be set out next year.

In an interview on ITV’s The Martin Lewis Money Show Live on Thursday, 27 November, Reeves said the government was looking at a “simple workaround” to stop state pensioners paying small amounts of tax to HMRC.

She said: “If you just have a state pension, and you don’t have any other pension, we are not going to make you fill in a tax return.”

Pressed on whether this meant these same state pensioners will have to pay any tax, the chancellor said: “In this parliament, they won’t have to pay the tax.”

MoneyWeek asked the Treasury to comment.

Concerns have been raised for those whose only income is the state pension, as they are dragged into paying income tax because of frozen thresholds and rising payments due to the triple lock.

The phenomenon, known as fiscal drag, is pulling millions of taxpayers into paying more tax on their income due to rising wages.

Helen Morrissey, head of retirement analysis at financial services firm Hargreaves Lansdown, said pensioners would be “breathing a sigh of relief” over the chancellor’s announcement.

However, Steve Webb, former pensions minister and now partner at consulting firm LCP, raised questions over whether those on the basic state pension receiving additional amounts, people with private pensions and pre-retiree workers will be exempt from income tax if their incomes tip marginally over the personal allowance threshold.

He said: “There is no costing for this policy in the Budget documents which suggests that it is still very much an idea rather than a firm plan.

“But it will be incredibly difficult for the Treasury to come up with something that is workable and fair.”

How pensioners can shield themselves from income tax

In 2024/25, an estimated 8.3 million people of state pension age paid tax, up from 7.83 million in 2023/24, according to HMRC.

If you’re one of the millions of pensioners already paying tax on your income, there are steps you can take to reduce your tax liability.

Firstly, you should maximise your tax-free lump sum, which is 25% of your pension pot or up to £268,275 in total, said Morrissey.

Secondly, if you are going to withdraw from your pot through drawdown, try to take out an amount that won’t push you over into a higher tax bracket.

For example, if you are on a full new state pension (£11,973 a year currently) and are drawing down just once in a year, you wouldn’t want to take out more than roughly £40,000 otherwise you’d be tipped into the higher rate tax bracket, based on having no income.

It’s also important to make the most of your ISA allowances, where any interest earned is tax-free. You can currently add up to £20,000 per tax year across any number of ISAs.

You can also defer your state pension, which would reduce your overall income that tax year. When you do come to take your state pension after deferring, the amount you get also increases. If you reach state pension age on or after 6 April 2016, it will rise by just under 5.8% for every 52 weeks delayed, provided you defer for at least nine weeks.

But, Morrisey warned: “You need to be aware that when you do come to take your state pension the higher amount could also have an impact on how much tax you pay.”

Summary

• Chancellor Rachel Reeves delivered her Autumn Budget speech in the House of Commons on Wednesday, 26 November
• The OBR’s forecast was accidentally leaked in a “technical error” prior to the Budget’s announcement, which Reeves said was “deeply disappointing”
• A range of tax hikes were announced as Reeves attempts to balance the books
• The chancellor cut the cash ISA limit from £20,000 to £12,000 per year for under 65s, from April 2027
• She also confirmed a £2,000 cap on National Insurance contributions relief for pension contributions made through salary sacrifice

What was announced in the Autumn Budget? | Autumn Budget winners and losers

Good afternoon and welcome to MoneyWeek’s Autumn Budget live report. Chancellor Rachel Reeves is due to announce her 2025 Autumn Budget at lunchtime tomorrow, Wednesday 26 November. We will be covering the announcements as they happen, as well as bringing you reaction and analysis.

What has Rachel Reeves said about the Budget – and what could be announced?

Chancellor Rachel Reeves gave a rare pre-Budget speech on 4 November, during which she pledged to cut NHS waiting lists, cut the national debt and cut the cost of living.

She promised a Budget “for growth with fairness at its heart… and a Budget that supports businesses – to create jobs and to innovate”.

However, it’s widely expected that a slew of tax hikes will be announced tomorrow.

In the 2024 Labour Party manifesto, the party promised not to raise National Insurance, the basic, higher, or additional rates of income tax, or VAT, so the chancellor will likely need to look elsewhere.

This could mean extending the ongoing freeze on income tax thresholds, from 2028 to 2030.

Another way the chancellor could boost Treasury coffers is a clampdown on salary sacrifice, or targeting dividend tax or capital gains tax.

There could also be a shake-up to property taxes, inheritance tax, and/or business taxes.

It was rumoured Reeves was considering raising income tax rates by 2p, and cutting National Insurance by the same amount, in a move which could raise £6 billion, according to think tank the Resolution Foundation.

However, the chancellor has reportedly since backed away from this idea.

Read more on potential tax hikes in our guide.

What time is the Autumn Budget?

Rachel Reeves will deliver the Autumn Budget in the House of Commons on Wednesday (26 November) at around 12:30pm, after Prime Minister’s Questions.

Most budget speeches usually last around an hour, but they could be shorter or longer depending on the content. It took Reeves roughly 80 minutes to deliver her first Budget in 2024.

Once Reeves finishes speaking, the shadow chancellor, currently Conservative MP Mel Stride, is expected to give a rebuttal that will last around 20 minutes. The debate then begins in earnest, likely dominating House business for the week ahead.

Daniel Hilton, junior writer

Will the cash ISA limit be cut?

Reeves is set to cut the annual cash ISA limit to £12,000 in the Autumn Budget, the Financial Times reports.

There is currently an overall £20,000 annual allowance for ISAs – this can be split across different types of ISA. For example, you could put £5,000 into a cash ISA and £15,000 into a stocks and shares ISA in a tax year, or you could use the whole annual allowance by putting £20,000 into a cash ISA if you wanted.

It's been suggested such a move could incentivise savers to put their money into a stocks and shares ISA instead, potentially boosting the British stock market.

In March, Reeves said she was seeking to “get the balance right between cash and equities to earn better returns for savers” and “boost the culture of retail investment” in the UK.

However, critics warn against the idea. The Building Societies Association, which represents 43 UK building societies and six credit unions, said building societies use cash ISA deposits to fund mortgages, so cutting the limit could make lending more expensive.

Meanwhile, Dame Meg Hillier, chair of the Treasury Select Committee, said now isn’t the right time to cut the cash ISA allowance. She added: “Instead, the Treasury should focus on ensuring that people are equipped with the necessary information and confidence to make informed investment decisions.”

What would a cash ISA allowance cut mean for savers?

The average amount saved into a cash ISA in 2023/24 was less than £7,000 per person, HMRC figures show, suggesting a £12,000 limit might not have a dramatic impact on most people.

However, it does "risk sending a confusing message to savers", says Adam French, head of news at Moneyfactscompare.co.uk.

“For many families, young professionals and pensioners, the full £20,000 allowance may be out of reach, but the principle that they can build a risk-free cash buffer against a volatile world without worrying about future tax changes still matters.”

The ongoing freeze on income tax thresholds mean more Britons face being dragged into higher tax bands. Combined with higher interest rates, savers will find more of their savings interest becomes liable for income tax, making the tax-free ISA wrapper increasingly important.

“Taken together, this feels less like a coherent plan to boost long-term investment and more like a quiet raid on those who are trying to do the right thing,” French said.

“By leaning on frozen thresholds and a lower cash ISA limit, the government is quietly raising revenue off the back of diligent savers, when it should be encouraging responsible financial decisions and a healthier savings and investment culture.”

Read more: 'I've used my annual ISA allowance. How can I shield my savings from tax?'

The best and worst case scenarios for the financial markets

What’s the best and worst we can realistically hope for in the Budget, and how might the markets respond?

“Arguably the best case scenario for financial markets would be the unveiling of more rosier than expected projections for both UK growth and productivity, and a smaller fiscal gap than previously feared,” says Matthew Ryan, head of market strategy at global financial services firm Ebury.

That would reduce the size of the fiscal deficit, enabling Reeves to maintain credibility by plugging it with narrower, more targeted tax hikes and avoiding the need to breach any of its manifesto pledges.

But the chances of things panning out this way don’t seem strong.

“We are bracing for some curveballs,” says Ryan. “Investors will be on high alert for any unexpected tax increases, and the risk of both higher borrowing forecasts and further above-inflation spending hikes.”

A tax-heavy Budget could see sterling sell off, and given the anticipated negative impact on growth, could lead to faster rate cuts from the Bank of England.

“A more growth friendly budget would have the opposite effect, as easing bets in favour of MPC cuts would amplify upside in the pound,” says Ryan.

Dan McEvoy, senior writer

Help to Save scheme set to be expanded

The chancellor is expected to make the Help to Save scheme permanent from 2028. It had been due to end in 2027.

It is also set to be opened up to parents and carers on Universal Credit from 2028.

Help to Save offers a 50% boost on savings in the scheme – giving eligible savers a potential government bonus of £1,200 over four years.

Soft drink levy extended

The soft drinks industry levy will be expanded to include sugary milk-based drinks, Health Secretary Wes Streeting announced today.

The changes will affect pre-packaged milk-based and milk-alternative drinks with added sugar, such as supermarket milkshakes, flavoured milks, sweetened yoghurt drinks, chocolate milk drinks, and ready-to-drink coffees.

This does not include plain, unsweetened milk and milk-alternative drinks.

The government will also reduce the threshold from 5 grams to 4.5 grams of sugar per 100ml.

Businesses will have until 1 January 2028 to reduce sugar in their drinks, or face the levy.

Health and Social Care Secretary Wes Streeting said: "The levy has already shown that when industry cuts sugar levels, children’s health improves. So, we’re going further.

“A healthier nation will mean less pressure on our NHS, a healthier economy, and a happier society.”

The government expects the changes to raise £40 million to £45 million per year in extra tax receipts, once introduced on 1 January 2028.

What do we know about the Budget so far?

While a lot is still under wraps, the Treasury has confirmed a number of policies in recent days.

Reeves is extending the freeze on NHS prescription charges next year, saving patients in England around £12 million, the government said.

A single prescription will remain at £9.90 and three-month and annual prescriptions prepayment certificates will also be held at the current level for 2026/27.

On Sunday, the Treasury announced all regulated rail fares would be frozen next year, for the first time in 30 years.

The chancellor is also set to confirm the state pension will rise by 4.8% during tomorrow’s speech, affecting 13 million pensioners.

Find out what we know so far about Rachel Reeves’s 2025 Autumn Budget in our guide.

National Living Wage and National Minimum Wage to rise

Chancellor Rachel Reeves has unveiled another sweetener this evening ahead of the Autumn Budget by announcing an increase to the National Living Wage (NLW) and also the National Minimum Wage (NMW).

From 1 April 2026, the NLW will rise by 4.1% to £12.71 per hour for eligible workers aged 21 and over.

This will increase the gross annual earnings of a full-time worker on the NLW by £900, benefiting around 2.4 million low-paid workers, the Treasury said.

The NMW rate for 18 to 20-year-olds will also increase by 8.5% to £10.85 per hour.

This will mean an annual earnings increase of £1,500 for a full-time worker, and marks further progress towards the government’s goal of phasing out 18-20 wage bands and establishing a single adult rate.

The NMW for 16 to 17-year-olds and those on apprenticeships will increase by 6% to £8 per hour.

It is good news for employees but employers may worry about the extra costs after already being hit with National Insurance hikes in the previous Budget.

The benefits of the pay rise may also be offset though by other rumoured policies such as a clampdown on salary sacrifice for pension contributions and an extension of frozen income tax thresholds, putting more people at risk of fiscal drag.

Marc Shoffman, contributing editor

MoneyWeek’s Budget wishlist

That’s all from us this evening – we will be back tomorrow morning for live coverage of Budget Day.

Before we sign off, the MoneyWeek team has shared what they’d like to see in the Budget.

Thank you for joining us for our 2025 Autumn Budget preview. Please join us again tomorrow morning as we prepare to hear what the chancellor will announce.

How do you feel about the Autumn Budget?

Good morning and happy Autumn Budget Day! There are just hours to go until Rachel Reeves delivers her speech in the House of Commons. Tax rises and/or spending cuts are almost certainly on the cards, but it remains to be seen just what the chancellor will announce.

We want to hear from you – how are you feeling about today’s Budget? Vote in our poll below.

What will be in the 2025 Autumn Budget?

Reeves will deliver the Budget speech today at around 12.30pm, after Prime Minister’s Questions.

Some details have already been announced – such as an increase to the national living wage and national minimum wage next year, and an extension of the freeze to NHS prescription charges.

Reeves: 'Britain won’t return to austerity’

Ahead of her Budget speech today, the chancellor has said she will take "the fair and necessary choices" to deliver on the Government’s mandate for change.

In a video, Reeves said: “I’m not going to return Britain back to austerity. Nor will I lose control of public spending, more reckless borrowing.”

She added: “I will take action to help families with the cost of living…cut hospital waiting lists…cut the national debt."

Farmers protesting in Westminster ahead of Autumn Budget

Tractors are assembling outside the Houses of Parliament this morning ahead of the Autumn Budget, in protest against a move that Reeves brought in last year to remove inheritance tax relief above £1 million for farms and rural businesses.

“Whilst much of the focus has been on the anticipated new policies being announced today, tractors in Downing Street again this morning illustrate the impact that is still being felt in rural communities around the changes announced last year to Agricultural Property Relief,” said Hannah Wallbridge, senior associate at regional law firm Gardner Leader.

The changes, which critics argue will force the breakup of smaller, family-owned farms, will take effect in April 2026.

“Unless further changes are announced today, the clock continues to run for those farming families to seek estate planning advice,” said Wallbridge.

Dan McEvoy, senior writer

Could we see exemptions to stamp duty on shares in the Autumn Budget?

One of Reeves’s many headaches in the Autumn Budget today is finding a way to reinvigorate London’s long-suffering stock market.

The London Stock Exchange (LSE) has seen some of the UK’s biggest companies, such as AstraZeneca and Wise, seek new listings overseas this year. There is a not-unjustified perception that UK-listed companies suffer from low valuations, especially in comparison to US-listed counterparts.

Yesterday, Bloomberg reported that Reeves is considering a stamp duty holiday for companies that list on the LSE. If it comes about, it would see companies exempted from the 0.5% stamp duty tax that currently applies to UK-listed shares for three years after their IPO.

“If this Budget rumour proves accurate, it may be the carrot British businesses need to plump for a domestic listing,” said Emma Wall, chief investment strategist at Hargreaves Lansdown.

Reeves is also expected to announce other measures aimed at encouraging Brits to start investing, including a potential cut to the annual cash ISA allowance in order to encourage investments into stocks and shares ISA.

Dan McEvoy, senior writer

When were the longest and the shortest Budget speeches?

Sitting through upwards of an hour of dense talk on the public finances can be somewhat of a slog, even for the most passionate among us.

Spare a thought, then, for some of Parliament’s honourable Victorian members who listened to the longest uninterrupted Budget speech in history in 1853.

The marathon address was given by then chancellor William Ewart Gladstone, who spoke for around four hours and 45 minutes. Such lengthy speeches were characteristic of the four-time Liberal prime minister – he was notable for often giving speeches of up to five hours without a break when he campaigned in Midlothian.

Gladstone’s opposite in almost every sense was the Conservative politician Benjamin Disraeli, Gladstone’s political arch-rival with whom he traded the premiership of the UK across decades.

It is perhaps fitting that Disraeli holds the opposite Budget record, delivering the shortest Budget in history in 1867, lasting just 45 minutes.

That is not to say that Disraeli was not susceptible to speaking at length. When including Budgets with interruptions, Disraeli holds the record for the longest speech, lasting five hours, though this included a break.

Daniel Hilton, junior writer

The lost art of a budgetary tipple

Drinking on the job is probably not allowed in your workplace and, despite the many bars nestled within the Palace of Westminster, is usually forbidden in the House of Commons for politicians – that is, apart from in one circumstance.

The chancellor is the only politician permitted to drink alcohol in the chamber, according to parliamentary tradition, and can only do so when delivering the Budget.

Previous chancellors have made the most of this. William Ewart Gladstone, who first became chancellor in 1852 and later became the prime minister, drank a bizarre mixture of sherry and beaten egg, while his opposite number, Conservative politician Benjamin Disraeli, drank brandy and water.

It is not just chancellors far in the past who embraced the tradition. More recent examples include Geoffrey Howe (gin and tonic), Nigel Lawson (spritzer), Hugh Gaitskell (rum and orange), Hugh Dalton (rum and milk), Winston Churchill (brandy), and Kenneth Clarke (whisky).

These days, the tradition seems to be dead. Every chancellor since Gordon Brown has had plain water while delivering the budget.

Daniel Hilton, junior writer

Balancing the books in the Autumn Budget

The Autumn Budget is, first and foremost, an exercise in balancing the national books. Rachel Reeves has an added challenge on this front as, during last year’s election campaign, the Labour party pledged to not raise any of the “big three” taxes on working people (income tax, (employees’) national insurance and VAT).

Labour’s fiscal rules also commit the government to fund day-to-day spending entirely through revenue as opposed to borrowing by the 2029/30 tax year.

“Chancellor Reeves will want to show a materially higher fiscal consolidation in the Autumn Budget of close to £30 billion, likely extending the headroom against the fiscal rules closer to £15 billion,” said Reto Cueni, chief economist at private bank Syz Group.

Achieving this will require tax increases, and Reeves will likely target ‘non-inflationary’ areas such as tax threshold freezes or reducing capital gains tax exemptions.

“Further tax hikes are a foregone conclusion. Some, including another freeze to the income tax thresholds, are as good as fully priced in by markets,” said Matthew Ryan, head of market strategy at Ebury.

“It will be key for the government to show that over the next two years the budget deficit will be reduced and the UK’s debt burden will finally move down,” said Cueni. “By reducing the fiscal deficit over the next two years, the government can regain fiscal credibility and assure investors that the UK’s government is keeping control of the debt situation.

“This would relax tensions in the gilts market and let yields grind lower,” Cueni added.

Dan McEvoy, senior writer

Reeves leaves Downing Street

Chancellor Rachel Reeves has left Number 11 Downing Street to deliver the 2025 Autumn Budget. She will make the long-awaited speech at around 12.30pm in the House of Commons, after Prime Minister's Questions.

FTSE 100 on the rise ahead of Autumn Budget

Not many people are feeling happy about the Autumn Budget, as speculation over tax rises continue to heat up.

But for the FTSE 100 and bonds market, it’s been more of a joyous morning as stocks and bonds rise with the budget set to draw a line under months of speculation and uncertainty for businesses.

Ten-year UK gilt yields – in effect, the return the government promises to pay buyers of its debt – opened higher this morning at around 4.52%, but have since fallen back to around 4.5%. Bond yields move in the opposite direction to prices.

The FTSE also opened 10.09 points (0.1%) higher at 9,619.62.

The chancellor has been drip feeding some of her policies all week, in particular around the costs of living measures.

But with mounting pressures to reduce debt, some of the hard hitting measures are most likely to be announced this afternoon. Brace!

Kalpana Fitzpatrick, editor

Will the two-child benefit cap be lifted?

The chancellor could look at lifting the two-child benefit cap today – a move which charities say would lift hundreds of thousands of children out of poverty.

The cap limits the extra amount of Universal Credit families can receive to two children and was introduced by the Conservative government in the 2015 Budget.

Households on Universal Credit with a third or more children born from 6 April 2017 do not receive extra amounts under the cap.

There are exceptions to the two-child limit, for example for parents that have had multiple births, like twins or triplets.

Sam Walker, writer

What economic circumstances is Rachel Reeves contending with?

It is no secret that today’s budget will be delivered under some difficult economic circumstances.

The UK economy grew by a paltry 0.1% in the three months to September, the latest official data shows, including a month-on-month contraction of -0.1% in September.

At the same time, unemployment is at the highest level since 2021, climbing to 5% in September. Inflation has also remained much higher than the 2% target, for most of the year. The latest figures show price growth was 3.6% in the year to October.

Amid these dreary figures, the chancellor reportedly faces a £22 billion black hole in the public finances, according to estimates by the Institute for Fiscal Studies (IFS), an influential think tank.

It means the chancellor must find an extra £22 billion just to stick to previous commitments for government spending, while keeping her fiscal headroom at £10 billion.

As the chancellor’s rules stop her from increasing borrowing to meet day-to-day government spending, this budget shortfall will need to be filled by either cutting expenditure or raising taxes.

Daniel Hilton, junior writer

BREAKING: OBR forecast released early

The Office for Budget Responsibility has reportedly published its forecast early. Usually, the forecast is released after the Budget is announced.

There is speculation that the apparent early release may have been an accident. More news to follow.

What are the chancellor’s fiscal rules?

You may hear a lot of references to ‘fiscal rules’ in the chancellor’s speech and the surrounding commentary today.

These are a set of three principles governing the public finances that Rachel Reeves has committed to sticking to as a way to keep the trust of the markets and the public.

They are entirely self-imposed, but the Office for Budget Responsibility (OBR), the UK’s official budget watchdog, calculates whether the government will meet them or not.

Rule 1: “The current budget should be on course to be in balance or surplus by 2029/30” (‘stability rule’).

This rule requires the government to ensure that the day-to-day costs of running the country are met by revenues by the 2029/30 tax year, the final one of the current parliament.

The rule was tweaked in 2024 to mean that borrowing is allowed for the purposes of investment, but still means that day-to-day spending (like of running the NHS) cannot be funded through borrowing.

Rule 2. “Net financial debt should fall as a share of the economy in 2029/30” (‘investment rule’)

This rule requires public debt to be forecast by the OBR to be lower in 2029/30 than 2028/29 in terms of GDP.

Public debt is defined as public sector net financial liabilities, or ‘net financial debt’.

Rule 3. “Some types of welfare spending must remain below a pre-specified level” (the ‘welfare cap’)

This rule adds constraints on roughly half of government welfare spending. It requires total annual welfare spending in this parliament to be at a maximum level of £194.5 billion by 2029/30.

The margin for overspend is 5%. Pension payments and welfare that are ‘most sensitive to the economic cycle’ (like Jobseekers’ Allowance) are excluded from the cap.

Daniel Hilton, junior writer

Prime Minister’s Questions is underway in the House of Commons. Prime minister Keir Starmer will answer questions from MPs for around half an hour. Chancellor Rachel Reeves should then take to the dispatch box soon after, to deliver the 2025 Autumn Budget speech.

Kemi Badenoch, the leader of the opposition, is expected to deliver her response immediately afterwards.

Mansion tax to be introduced on £2 million homes

The Office for Budget Responsibility appears to have confirmed plans for a mansion tax on homes worth £2 million and above.

The plans are set to be revealed by chancellor Rachel Reeves but seem to have been confirmed by BBC News, which has reportedly obtained an early copy of the OBR forecasts when it was published in error.

There was speculation about the new levy in the build-up to the Budget, which is effectively a wealth tax.

But critics will likely label it a levy on London and the South East, where most £2 million homes are situated.

A mansion tax could also cause a freeze at the top-end of the property market. Rightmove data shows sales agreed for £2 million-plus homes are already down 13% year-on-year.

Marc Shoffman, contributing editor

Reeves extends ‘stealth tax’ until 2030, breaking previous commitment

The freeze on income tax thresholds has been extended until 2030, according to the BBC. The organisation has reportedly obtained an early copy of the OBR’s budget report seemingly in error.

MoneyWeek has approached the OBR for confirmation that the forecast has been leaked early, and apparently by accident. As yet, we have not received a reply.

New tax to be levied on electric vehicle drivers

Electric vehicle (EV) drivers are set to pay a new tax for each mile they drive, according to the OBR’s leaked report, as reported by the BBC.

The complete details have not yet been confirmed, but the report says the new mileage-based charge will be “around half the fuel duty rate paid by drivers of petrol cars (raising £1.4 billion)".

Drivers of petrol and diesel vehicles have to pay fuel duty when they fill up, charged at around 53p per litre. The new EV tax is designed to bring their taxation closer in line with typical vehicles.

Household energy bills to be cut

Households gas and electricity costs will be lowered through cuts to green levies on energy bills, the BBC reports.

It will cost around £2.3 billion, according to the OBR.

Two-child benefit cap lifted

The two-child benefit cap, which limits the amount of Universal Credit families can receive, will be lifted, according to the BBC. The OBR has reportedly estimated this will cost £3 billion by 2029/30.

Estimates from the Child Poverty Action Group have suggested lifting the cap would lift 350,000 children out of poverty and mean 700,000 are in less deep poverty.

Government fiscal headroom will grow to £22 billion

The early release of the OBR’s report suggests the chancellor will increase the government’s ‘fiscal headroom’ to £22 billion, up from its current level of £10 billion, the BBC reports.

OBR: Inflation to be higher than expected in 2025 and 2026.

Inflation is set to be 3.5% in 2025, according to the BBC, based on the OBR’s early leaked report.

The new forecast is higher than their previous expectation of 3.2%, which the OBR made in March.

Inflation is also expected to be higher in 2026, reaching a level of 2.5% according to the OBR. This is above their previous expectation of 2.5%.

The OBR maintains its forecast that inflation will be 2% in 2027.

OBR downgrades growth predictions

The Office for Budget Responsibility (OBR), the UK’s independent budget watchdog, has degraded its GDP growth forecast, according to the BBC.

The watchdog now expects GDP to grow by 1.5% on average over the five year forecast period, ending in the 2029/30 tax year, 0.3 percentage points slower than they anticipated in March.

Fuel duty frozen until September 2026

Fuel duty will be frozen at its current rate until September 2026, the BBC reports the OBR says.

The headline rate on standard petrol and diesel is currently 52.95p per litre.

Sam Walker, writer

OBR apologises for leaking forecast early

The OBR has apologised for leaking its forecast ahead of Rachel Reeves’s Autumn Budget announcement.

A statement on the OBR’s website reads:

“A link to our Economic and fiscal outlook document went live on our website too early this morning. It has been removed.

“We apologise for this technical error and have initiated an investigation into how this happened.

“We will be reporting to our Oversight Board, the Treasury, and the Commons Treasury Committee on how this happened, and we will make sure this does not happen again.

“Our Economic and fiscal outlook and supporting documents will be released when the Chancellor has finished her speech.”

Should we have had Budget leaks?

I am seriously thinking of getting my ears checked – at 12:05 I heard the Prime Minister Keir Starmer say details will be released “in 25 minutes” yet a few minutes soon after he said that it seems like the Office for Budget Responsibility then leaked its report to various media outlets, including the BBC.

This report is usually released AFTER the chancellor makes her speech - such a leak has not happened before. Some reports of what Rachel Reeves is about to say are now out - but Reeves has yet to speak.

The OBR has since apologised - but this has clearly been a Budget of leaks, causing anxiety and uncertainty. Are such leaks ever acceptable?

Kalpana Fitzpatrick, digital editor

Pension savers to be hit with salary sacrifice cap

Rachel Reeves is set to announce a cap on salary sacrifice schemes in a new blow for pension savers.

An Office for Budget Responsibility forecast, published in error and seen by BBC News, suggests the Autumn Budget will introduce a £2,000 cap on the amount of earnings that can be exchanged for pension contributions that benefit from a National Insurance exemption. This will come in from April 2029, according to the OBR.

Marc Shoffman, contributing editor

Reeves begins 2025 Budget speech

Reeves has begun her Budget speech. Much of the chancellor’s Budget has been reported ahead of this speech, after the OBR report was published in error earlier today. Reeves called it a “serious error” on the OBR’s part.

Leaked OBR report ‘deeply disappointing’ and a ‘serious error’, says Reeves

Rachel Reeves has slammed the OBR for releasing their Budget report early in error.

She said: “This is deeply disappointing and a serious error on their part. The Office of Budget Responsibility have already made a statement taking full responsibility for their mistake.”

Cash ISA limit cut to £12,000 – but not for over 65s

The annual cash ISA allowance will be reduced from £20,000 to £12,000 from April 2027 as the chancellor bids to push savers towards the stock market. However, over 65s will retain the full cash ISA allowance.

The overall allowance of £20,000 per year isn’t changing, so savers will still be able to spread their money across multiple ISA accounts up this limit.

However, Reeves may still have to convince members of the public to take a more investment-heavy approach with their savings.

Recent research polling by Paragon Bank of 1,400 cash ISA savers, found the majority would not invest in stocks and shares and would switch to regular savings accounts instead, despite this potentially driving up their income tax bill.

Sam Walker, writer

Stamp duty holiday for London IPOs

In a bid to use her Autumn Budget to boost the UK’s beleaguered stock market, Reeves has announced a three-year exemption from stamp duty for companies listing on the London Stock Exchange (LSE).

The LSE has struggled to attract high-profile companies to list on the exchange even when they are based in the UK. Unilever’s anticipated spin-off of its ice cream business will see Amsterdam land the primary listing, while neobank Revolut – Europe’s most valuable private company following a funding round that valued it at $75 billion – appears to favour listing in the US over the UK.

Investors currently have to pay 0.5% stamp duty whenever they buy UK-listed shares, but Reeves has waived this for newly-listed companies.

“This would make buying British more enticing for investors and help redress some businesses’ concerns about demand for UK shares,” said Emma Wall, chief investment strategist at Hargreaves Lansdown. “London has been losing out to New York in recent years, as businesses favour the funding and regulatory environment of the New York Stock Exchange.”

Dan McEvoy, senior writer

OBR downgrades productivity growth forecast

The OBR has downgraded their forecasts for productivity growth. The downgrade will cost the economy £16 billion.

The chancellor said the blame for this lies at the feet of the Conservatives, and promises to defy the forecast.

Chancellor announces multi-million playground makeover

Local communities are set to receive an £18 million funding package to help revamp their playgrounds.

The funding will target 200 children’s play parks across England in a bid to “breathe new life into play areas across England, creating safe, exciting spaces for thousands of children”.

The government says the funding will help ensure every child can enjoy the benefits of playing outdoors as research shows poorer children spend much less time outside than richer ones.

Daniel Hilton, junior writer

Chancellor’s £5 million books boost for secondary schools

Millions of pounds in new funding will become available to secondary schools in England to help them revitalise their school libraries.

The chancellor announced a £5 million funding package that will allow all secondary schools across the country to spend around £1,400 each on books, incentivising children to get off their phones and read instead.

The funding comes at a time when reading for pleasure is in sharp decline among young people, with the number of 8 to 18 year olds saying they enjoy reading in their spare time falling by a third since 2019.

Daniel Hilton, junior writer

Gilt yields swing following pre-Budget leak

Gilt yields – in effect, the interest paid on UK Government debt – initially fell following the leak of the OBR’s report.

Yields on 10-year gilts fell from around 4.50% to 4.43% at approximately 11.45am.

But they have since risen back to above their level before the leak – now standing at 4.52% as of 12.44pm.

Lower yields indicate greater bond market confidence in the UK government as a borrower, and vice versa.

The initial dip perhaps reflects optimism based on the policies announced in the Budget, but the reversion likely implies pessimism over the longer term outlook for productivity.

Overall, though, gilt yields are little changed from before the OBR forecast’s release.

“We’ve seen a relatively orderly reaction in gilts and the pound to the details of the budget so far,” said Matthew Ryan, head of market strategy at Ebury. “Market participants will be breathing a sigh of relief that the chancellor appears to have learnt from past mistakes, and will instead be affording herself a larger fiscal headroom in excess of £20 billion, as opposed to the razor-thin one we saw last year.”

Carrot and stick approach to ISAs

Cash ISAs will be limited to £12,000, and if you want to take advantage of the full £20,000 allowance then you will need to invest the rest.

This isn’t quite as bad as the ‘cut’ we anticipated, and it still leaves savers with a choice.

But this will still require some convincing and education. I’ll also be interested in knowing how this would work in practice, and will we see new ISA products launched? Possibly, yes.

Kalpana Fitzpatrick, digital editor

250 new Neighbourhood Health Centres to be built

The government is set to open 250 new ‘Neighbourhood Health Centres’ in the country to help improve healthcare access.

The centres, which will bring together GPs, nurses, dentists and pharmacists under one roof, will be first built in the most deprived areas of the country.

The government hopes that opening the new centres will cut NHS waiting lists and “bring an end to the postcode lottery of healthcare access”.

Daniel Hilton, online writer

Reeves extends income tax threshold freeze

Chancellor Rachel Reeves has extended the freeze on income tax thresholds from 2028 to 2031.

The move means workers will pay more tax when their salaries increase, as more of their pay is dragged into higher tax bands, leading some to label it a ‘stealth tax’.

She said: “The previous Conservative government froze personal tax thresholds from 2021 to 2028 and today I will maintain all income tax and equivalent National Insurance thresholds at their current level for a further three years from 2028.

“I know that maintaining these thresholds is a decision that will affect working people. I said that last year, and I won't pretend otherwise. Now, [...] I'm asking everyone to make a contribution.”

It means tax bands in England, Wales and Northern Ireland will remain at the following levels until the end of the 2029/30 tax year:

Source: HMRC

Income tax bands are different in Scotland.

Tax thresholds have historically risen with inflation, meaning workers paid tax on the same proportion of their earnings in real terms each year.

However, since the 2022 tax year, thresholds have been frozen at their 2021/22 levels. This raises tax receipts through a phenomenon known as ‘fiscal drag’.

The government had previously stated this freeze would end after the 2027/28 tax year, but today’s announcement means fiscal drag will continue for longer than expected.

Figures from HMRC recently showed that in the last year alone, more than a million Brits were dragged into higher tax bands because of the threshold freeze.

Daniel Hilton, writer

Class 2 National Insurance contributions abolished for people living abroad

The government is removing access to the cheapest Class 2 Voluntary National Insurance contributions (VNICs) for individuals living abroad and increasing the initial residency or contributions requirement for VNICs to 10 years.

Tax hike for property, dividend, and savings income to rise

The chancellor has confirmed rumours that tax on income from property, dividends and savings interest will be increased, rising by two percentage points.

The change will affect all taxpayers with income from these sources, on both the basic and higher rate of income tax.

Reeves said the measure will narrow the gap between the tax on income from assets and income from work.

“Even after these reforms, 90% of taxpayers will still pay no tax at all on their savings,” she added.

Daniel Hilton, writer

Mansion tax confirmed for £2 million homes

Rachel Reeves has confirmed details of a new mansion tax for homes worth £2 million and above.

From April 2028, owners of properties identified as being valued at over £2million by the Valuation Office (in 2026 prices) will have to pay a recurring annual charge on top of their current council tax.

There will be four price bands with the High Value Council Tax Surcharge rising from £2,500 for a property valued in the lowest £2 million to £2.5 million band to £7,500 for a property valued in the highest band of £5 million or more, all uprated by CPI inflation each year. This measure is estimated to raise £0.4 billion in 2029-30.

The levy is likely to cause blockages at the higher end of the property market though.

Tom Bill, head of UK residential research at Knight Frank, said: “Until the revaluations take place, buyers and sellers face years of uncertainty, especially around the £2 million threshold. Even once completed, new valuations can be challenged, which would prolong the limbo.

“The policy may also raise less than expected, especially because it is deferrable. If opposition parties say they would scrap it, many homeowners will look at the opinion polls and wait it out. When you factor in the cost of carrying out the valuation and the potential lost stamp duty revenue from a stickier market, the sums raised could look like a rounding error for the Treasury.

“More properties will inevitably get dragged into the mansion tax net, which means the proportion of terraced houses, flats and semi-detached homes will grow over the years, particularly in the capital. The term ‘mansion tax’ will increasingly feel like a misnomer.

“Overall, it feels like politics has trumped economics. One the one hand, the policy is designed to keep backbenchers happy and ensure the near-term survival of the chancellor and prime minister. On the other hand, it throws a spanner into the works of the housing market for not much money in return, which is important in the context of a Budget where spending is front-loaded. The UK already pays the highest percentage of property taxes among OECD countries.”

Marc Shoffman, contributing editor

£2,000 salary sacrifice cap confirmed

Chancellor Rachel Reeves has confirmed plans to introduce a £2,000 cap on the amount of earnings that can be exchanged for pension contributions that benefit from a National Insurance exemption.

It will be introduced from April 2029.

Introducing the cap could reportedly raise up to £2 billion a year but it will have an impact on the amount employees can save into a pension from their post tax income, ultimately affecting their take-home pay if they want to continue putting money into their workplace scheme.

Contributions above the cap will be taxed in the same way as other contributions.

Employers may also have less incentive to offer benefits, plus this could raise fears of other salary sacrifice schemes being targeted in the future such as bike to work and company car benefits.

AJ Bell has previously warned that the pensions of higher earners could be £50,000 smaller due to the salary sacrifice changes.

Steve Hitchiner, chair of the tax Group at the Society of Pensions Professionals (SPP) said: “Restricting salary sacrifice for pensions will affect the take home pay of millions of employees – especially basic rate taxpayers – and is a tax on working people, in spirit if not in name. It is also another sizeable cost to employers and, perhaps most importantly its restriction will reduce pension saving.”

Marc Shoffman, contributing editor

Cash ISA cuts – pros and cons

Cuts to the annual cash ISA allowance was shaping up to be one of the most divisive policies ahead of the Autumn Budget. Reeves appears to have struck something of a compromise by cutting the annual allowance to £12,000, but exempting over-65s who, understandably, may want to take fewer short-term risks with their money.

“This is a carefully considered solution that promotes the benefits of investing in the stock market for the long term, whilst addressing concerns of older savers who prioritise financial certainty,” said Richard Stone, CEO, Association of Investment Companies.

But Harriet Guevara, chief savings officer at Nottingham Building Society, calls the cut to the cash ISA limit “a deeply disappointing outcome for both savers and lenders”.

“We support the government’s aim to boost an investing culture in the UK,” she added, “but restricting choice is not the way to do it.”

Dan McEvoy, senior writer

EVs to be subject to new 3p per mile tax

Drivers of electric vehicles will now have to pay a flat tax of 3p per mile, bringing taxation of EVs more in line with typical vehicles.

Fully electric vehicles will be subject to the 3p per mile tax, while plug-in hybrid vehicles will have to pay 1.5p per mile.

It is estimated that the new tax will cost the average driver of a fully electric car approximately an extra £250 a year.

Daniel Hilton, writer

Electric vehicle grant extended

After announcing the new set of EV taxes, the chancellor eased the pain slightly by extending the UK’s new electric car grant until 2030.

The grant currently subsidises the price of a new EV by between £1,500 and £3,750 depending on the model.

Daniel Hilton, writer

Reeves confirms no change to income tax

It was widely trailed before the Budget but Reeves has now confirmed herself that income tax – as well as the other two ‘big three’ taxes – won’t be raised (beyond the extension to the income tax threshold freeze).

“I can confirm that I will not be increasing National Insurance, the basic higher or additional rates of income tax or VAT,” said Reeves.

“I have kept everyone's contribution as low as possible through reforms to make our tax systems stronger, closing loopholes, ensuring that the wealthiest pay their share, and building a tax system that is fairer,” she added.

Dan McEvoy, senior writer

Rail fares to be frozen for the first time in 30 years

Rail fares will be frozen at current levels for the first time in 30 years, meaning all regulated rail tickets, including season tickets, peak returns, and off–peak returns, will remain the same price next year.

The Treasury says the freeze could save commuters on more expensive routes upwards of £300 a year, assuming they commute to the office three times a week.

Without a freeze, rail fares were set to increase by 5.8% in 2026.

Daniel Hilton, junior writer

Two-child benefit cap to be lifted

The government has confirmed the two-child benefit cap will be lifted, which charities have said could lift hundreds of thousands of children out of poverty.

The cap limits the amount of extra Universal Credit families with children can receive. The cap was first introduced by the then Conservative government in 2015.

Helen Barnard, director of policy at charity Trussell, said: "This move will protect hundreds of thousands of children from growing up facing hunger and hardship.

"It shows that the chancellor has listened to families and food banks across the UK who have been imploring her to act."

Sam Walker, writer

State pension to increase by 4.8%

Thirteen million pensioners will receive a pay rise next April after the chancellor confirmed the state pension will rise by 4.8%.

Those on the full new state pension will see their weekly payments go up from £230.25 to £241.30 (£12,547 a year) under the triple lock mechanism – a rise of more than £550 per year.

The full basic state pension weekly amount will go up from £176.45 to £184.91 (£9,615 a year) – an increase of just under £440 a year.

Because the new tax year starts on 6 April 2026, you won’t get the new rate until your first pay date after this date.

Sam Walker, writer

Fuel duty frozen until September 2026

The chancellor confirmed the freeze to fuel duty will be kept in place until September 2026.

The freeze has been in place since 2011/12, meaning the headline rate on standard petrol and diesel is 52.95p per litre.

Sam Walker, writer

Reeves to cut energy bills by £150 by ending green levies

The chancellor has announced that the average annual energy bill will be cut by £150 from April 2026 onwards.

This will be done by removing the “Eco scheme”, a green levy added to energy bills, first introduced by the Conservatives.

Daniel Hilton, writer

Kemi Badenoch: Budget is a “total humiliation” and Reeves should resign

Kemi Badenoch, the Leader of the Opposition and leader of the Conservatives, will now respond to the Budget.

She opened her speech by calling the Budget a “total humiliation” and slammed the chancellor for “coming back for more” taxes.

She said: “Last year, she put up taxes by £40 billion, the biggest tax raid in British history. She promised that she wouldn't be back for more. She swore it was a one-off. She told everyone that from now on, it would be stability, and she would pay for everything with growth. Today, she has broken every single [promise].

“If she had any decency, she would resign,” she added.

Daniel Hilton, writer

Deutsche Bank: ‘Cost of living’ Autumn Budget increases headroom and reduces borrowing

Zooming out, today’s Autumn Budget – despite seeing the third-largest amount of tax increases since 2010 – appears to achieve three things, according to Sanjay Raja, chief UK economist at Deutsche Bank.

Firstly, it should keep government borrowing on a downward trajectory. “The UK’s budget deficit is expected to drop from 4.5% of GDP to 3.5% next fiscal year,” says Raja. “It is expected to drop to just under 2% of GDP by the end of the decade.”

Secondly, it has surprisingly doubled the chancellor’s fiscal headroom from £10 billion to just under £22 billion.

Thirdly, Raja expects the Budget to be disinflationary. “Budget policies are projected to reduce CPI by 0.4 percentage points in 2026/27,” says Raja. “This is reflected by a partial extension of the fuel duty freeze, reducing green levies, and a one-year freeze to rail fares.”

Dan McEvoy - senior writer

Administrative burden for pensioners on just state pension to be eased

Retirees whose sole income is the state pension will be spared the burden of having to pay very small amounts of income tax from April 2027 if the state pension exceeds the personal allowance, the chancellor announced.

It comes as the state pension is set to breach the tax-free personal allowance in 2027, according to the OBR. Without the policy, retirees whose only income is the state pension face having to pay income tax for the first time, via simple assessment.

No concrete method for implementing this has been confirmed yet, but the government says it is “exploring the best way to achieve this and will set out more detail next year”.

Daniel Hilton, writer

Benefits fraud: Plans to save over £1 billion on benefit fraud and error

Budget documents confirmed the government will extend a taskforce cracking down on fraudulent Universal Credit claims.

The Targeted Case Review scheme, first set up in 2022, will now close in 2031.

Fraudulent benefit claims cost the government £6.5 billion in the 2024/25 financial year, with £5.2 billion made up of fraudulent Universal Credit claims.

It comes as the DWP aims to keep a lid on the ballooning welfare bill, with forecasts predicting health and disability benefits will cost the government £70 billion by the end of the decade.

Sam Walker, writer

Hundreds more planners to get Britain building

The government will pump £48 million of additional funding into recruiting an extra 350 planners in England.

The planners will reportedly be brought in across both graduate and experienced roles.

Reeves is also said to be planning to unveil plans for a new Planning Careers Hub to retain planners and draw more people into these types of roles.

Sam Walker, writer

Care leavers guaranteed up to £13,500 in student loan support

All care leavers, young people who have left the care system, will be guaranteed the full student maintenance loan amount of £13,500 per academic year.

Just 14% of care leavers go to university, compared to 50% for the wider population, and they are much more likely to drop out.

The government says this is often due to financial barriers – the new loan guarantee will seek to address this issue.

Daniel Hilton, junior writer

Autumn Budget summary

Well there you have it. No rabbit in the hat though. The Autumn Budget started in an unusual way as the Office for Budget responsibility leaked its report a whole 20 minutes before the chancellor’s speech.

While this was certainly a Budget that protected vulnerable households, shielding them from the increasing cost of living. But, for everyone else, taxes are up and those with more wealth will pay more.

Here’s a quick summary:

• Cash ISA reforms. For cash savers, savings will be limited to £12,000. To take advantage of the full £20,000 allowance, you will have to invest the rest. Over 65s will see no change and keep the full £20,000 allowance.
• Salary Sacrifice pensions capped. There will be a £2,000 salary sacrifice cap confirmed - the amount of earnings that can be exchanged for pension contributions that benefit from a National Insurance exemption.
• Mansion Tax. Owners of properties worth over £2 million will have to pay a recurring annual charge on top of their current council tax. There will be four price bands with the new ‘High Value Council Tax Surcharge’ rising from £2,500 for a property valued in the lowest £2 million to £2.5 million band to £7,500 for a property valued in the highest band of £5 million or more, all uprated by CPI inflation each year.
• Tax hike on income from property, dividend, and savings by two percentage points. The change will affect all taxpayers. But she claimed 90% of taxpayers will still pay no tax at all on their savings.
• Income tax threshold freeze extended, from 2028 to 2031.
• People based abroad will no longer be able to make Class 2 National Insurance contributions.
• Two-child benefit cap to be lifted, which Reeves said will help tackle child poverty
• Electric vehicle (EV) grant extended to 2030, but EVs will be subject to new 3p per mile tax.
• Energy bills to drop by £150 from April 2026 as green levies cut.

Kalpana Fitzpatrick, digital editor

Lifetime ISA reform?

Budget documents have revealed the government will publish a consultation in early 2026 on the roll out of a new, "simpler", ISA product to help first-time buyers get a home.

Once launched, this new ISA product will be offered in place of Lifetime ISAs.

Currently, savers can add £4,000 per year into a LISA and get a 25% bonus on top from the government, up to a maximum of £1,000 a year. Any savings must be used to put down a deposit for a house that costs £450,000 or less or for retirement, otherwise you pay a 25% penalty.

However, the savings product has its critics, with some arguing the £450,000 limit for a house is not high enough for people buying in areas where property prices are above the UK average, such as London.

The £450,000 limit has also been frozen since the LISA was launched in 2017, despite house prices growing significantly since then.

Sam Walker, writer

A twist in the cash ISA limit shake-up

How much did the Budget raise taxes by?

The full Budget has now been delivered by Rachel Reeves, and the supporting documents from the Treasury and Office for Budget Responsibility (OBR) have been published.

Thanks to a slew of tax hikes, the chancellor will now have £26 billion more in tax revenue in 2029/30, according to the OBR, bringing the tax take to an all-time high of 38% of GDP in 2030/31.

The biggest chunk of this comes from the extension of the freeze on income tax thresholds until 2031, raising £8.3 billion in 2029/30.

The charging of National Insurance on salary sacrificed pension contributions is estimated to bring in around £4.7 billion in 2029/30. Increases to income tax rates on property, savings, and dividends will bring in a further £2.1 billion in 2029/30.

The rest of the revenue will be raised by the other measures announced in the Budget.

Daniel Hilton, writer

What do you think about Reeves’s Budget?

Over to you – what do you think about the announcements today? Have your say by voting in our poll below.

Recap: the Autumn Budget headlines

Here’s a quick recap of some of the major headlines that have come out of today’s Autumn Budget announcement:

• Mansion tax to apply to properties valued at over £2 million
• Cash ISA limit cut to £12,000
• Salary sacrifice on pension contributions limited to £2,000 before National Insurance payments kick in
• Higher tax rates on income from property, savings and dividends.

Of course, there are plenty of holes to pick in the specific measures that Reeves has taken. Not everyone is going to be happy when an extra £26 billion in taxes are announced.

As MoneyWeek’s digital editor Kalpana Fitzpatrick says, when considering the Budget’s winners and losers Reeves seems to have taken pains to ensure that the most financially vulnerable are shielded, and those that can pay will pay.

And the markets seem encouraged. The extra fiscal headroom has seen government borrowing costs fall markedly through today, while the FTSE 250 has gained nearly 1%.

Thank you for joining us

So, there we have it. Rachel Reeves has unveiled the 2025 Autumn Budget, increasing taxes by around £26 billion, according to the Office for Budget Responsibility (OBR).

From the new mansion tax to the tax hikes on property, savings, and dividend income, MoneyWeek writer Daniel Hilton covers the key takeaways from the Budget in a separate piece.

Thank you for joining us for our 2025 Autumn Budget coverage today.

Keep following MoneyWeek for further analysis and reaction to the Budget. You can get our top stories delivered directly to your inbox by signing up for the MoneyWeek newsletter.

Good morning and welcome back to MoneyWeek’s 2025 Autumn Budget coverage.

Chancellor Rachel Reeves delivered a wealth of tax hikes in yesterday’s speech.

As well as targeting wealthy homeowners with a new mansion tax (effective from April 2028), the chancellor extended the freeze on income tax thresholds by three years. She also capped National Insurance contributions relief on salary sacrifice into pension schemes to £2,000. The latter measure will come in from 2029.

Stick with MoneyWeek as we bring you more reaction and analysis today.

Rachel Reeves defends extension to tax threshold freeze

Rachel Reeves has addressed her decision to freeze income tax thresholds by three years. The Conservative government had frozen the thresholds until 2028, but the Labour chancellor extended the measure until 2031 in the Autumn Budget yesterday.

“I recognise that freezing thresholds does mean that we are asking ordinary people to contribute a bit more,” Reeves told BBC News today.

The chancellor said she had “kept the contribution to a minimum by changes elsewhere” and acknowledged that continuing the threshold freezes would impact working people.

“I’m not seeking to deny that," she added, "but I believe I made the fair and necessary choices yesterday to ensure we can cut the cost of living, cut NHS waiting lists and also reduce our debt and borrowing and hopefully give space to the Bank of England to cut interest rates further.”

Inheritance tax thresholds frozen until 2031

The inheritance tax (IHT) nil-rate bands will be frozen for a further year until April 2031, from April 2030, Budget documents reveal.

The IHT nil-rate band has been frozen at £325,000 and the residence nil-rate band is held at £175,000. It means families risk paying more IHT in the future as the value of assets rises.

Recent polling by Hargreaves Lansdown found 7% of people were most concerned about changes to IHT being announced in the Budget.

Sarah Coles, head of personal finance at the investing platform, said yesterday: "Nobody likes the idea of the taxman dipping into your pockets after you’ve died, so today’s news won’t be welcome."

Sam Walker, writer

Savers at risk of paying more tax as cash ISA cut and savings tax rate to be hiked

Millions of savers may face paying more tax on their savings in coming years, due to the chancellor’s cut to the cash ISA allowance.

From April 2027, under 65s will only be able to put £12,000 a year into a cash ISA, rather than the current £20,000 per year limit.

7.1 million people put money in a cash ISA in 2022/23, with just over two million (28%) putting more than £12,000 into this type of account, analysis by InvestEngine shows.

These two million savers could now face paying tax on savings interest once they exceed their personal savings allowance, if they continue saving above the new £12,000 cash ISA limit.

Savers who are 65 or older can continue putting up to £20,000 – the overall ISA allowance – into a cash ISA, if they wish to.

The personal savings allowance lets basic rate taxpayers earn £1,000 in savings interest outside of an ISA. The allowance is cut to £500 for higher rate taxpayers. Additional rate taxpayers don’t get a personal savings allowance.

The tax rate on savings income will rise by two percentage points across all bands from April 2027, meaning basic rate taxpayers will need to pay a 22% levy on savings interest above the personal savings allowance – unless the money is in a tax-free savings vehicle, such as an ISA or Premium Bonds.

The top easy access savings account currently pays an interest rate of around 4.5%.

If a basic rate taxpayer put £12,000 in a cash ISA, and held £8,000 – the difference between £20,000 and the new £12,000 limit – in a top non-ISA savings account, they would face having paid hundreds of pounds in tax after five years, analysis suggests.

Figures by InvestEngine and MoneyWeek compare how much tax on savings interest would be due in five years based on the previous savings tax rate and the hiked rate after April 2027.

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the online investment platform, said: “For committed savers, that want to continue saving more than £12,000 into a cash ISA, investing their money in the financial markets is one solution, provided they don’t need access to their money in the short term.”

The overall ISA allowance remains at £20,000, meaning if you maximise the cash ISA allowance, you could still put £8,000 into a stocks and shares ISA in the same tax year.

Haine added: “Equities have historically delivered higher real returns – that beat inflation – than cash over the long term.”

A time horizon of at least five years is recommended for investing in equities via a stocks and shares ISA.

Jessica Sheldon, deputy digital editor

OBR: New per mile EV tax will significantly slow sales

The government’s new 3p per mile tax on fully electric vehicles will mean hundreds of thousands fewer electric cars will be on UK streets by 2030/31 than expected, according to analysis by the Office for Budget Responsibility (OBR).

The new levy, which will come into effect in April 2028, will mean average drivers of fully electric cars could pay an extra £225 a year to the taxman. A reduced rate of 1.5p per mile will be paid by those with plug-in hybrid cars.

The UK’s fiscal watchdog said they expect the tax to raise around £1.1 billion in the 2028-29 tax year, and £1.9 billion in the following tax year.

However, they added that the measure is “likely to reduce demand for electric cars” as it increases the average lifetime cost of running an EV.

This will lead to a significant slowdown in sales, with the OBR expecting 440,000 fewer electric car sales by 2030/31.

Melanie Lane, chief executive of EV charging provider Pod, said the policy “will shake consumer confidence and potentially jeopardise investment in the sector at a critical moment”.

The chancellor announced the electric car grant will be extended until at least 2030, potentially further complicating government incentives to switch to zero-emissions vehicles.

Lane added: “We are already falling behind on the ZEV mandate that expects one in three cars sold to be zero-emissions next year and confirmation of additional mileage costs from 2028 will penalise motorists and manufacturers who are fulfilling their end of the bargain.”

Details of how the policy will be policed are yet to be published, but the government has started a consultation. They say they expect mileage to be self-reported, possibly at a car’s annual MOT.

Daniel Hilton, writer

Has the Budget cleared the path for UK stocks?

UK-listed stocks gained yesterday in the wake of the Budget and the OBR forecast. The FTSE 100 gained nearly 0.9% and the FTSE 250 – which is more exposed to the UK economy as it contains more small, domestically-focused companies compared to the large multinationals of the FTSE 100 – gained 1.2%.

“Expectations running into the budget were very low, sentiment very weak, and valuations of especially domestic and smaller companies in the UK [were] very suppressed,” said Richard Knight, portfolio manager at Merchants Trust.

There were a number of key wins the Budget was able to score as far as UK stocks were concerned. Increased fiscal headroom ought to alleviate some of the concerns about future tax rises. The Budget is also thought to be disinflationary on balance, which should encourage future interest rate cuts from the Bank of England.

Rate cuts would be “a significant positive stimulus for the UK economy and stock market” according to Knight. “We are seeing great opportunities in midcaps in particular, as they are over-sold, and sensitive to the pessimism around the UK, a great degree of which is priced-in to market valuations,” he added.

See our explainer on what the Budget means for the UK stock market for more information.

Freeze on income tax thresholds could cost taxpayers £1,300

The government's extension to a freeze on income tax thresholds could add an extra £1,292 to someone's tax bill by 2031.

Someone with a yearly income of £15,000 today faces stumping up an extra £259 over the three years between 2028 and 2031, according to analysis by AJ Bell.

Someone on £45,000 a year will take a hit of £683, while a taxpayer with an annual income of £47,000 will have to fork out an extra £1,292.

Laura Suter, head of personal finance at AJ Bell, said: "While it’s a nifty way for the government to raise money, the cumulative effect of the freeze means people are seeing their tax bills rise dramatically when compared to a system in which thresholds had increased by inflation each year."

Test your Autumn Budget knowledge

As taxpayers digest what the announcements will mean for them, Rachel Reeves and Keir Starmer have been defending the tax-raising Autumn Budget.

Starmer told Sky News today: “We kept to our manifesto in terms of what we promised but I accept the challenge that we've asked everybody to contribute."

The prime minister said the Budget measures would help protect the NHS, put money into schools and bear down on the cost of living.

From tax threshold freezes to a cut to up-front tax relief on VCT investments, how closely were you following the headlines?

Test your knowledge by taking part in our Autumn Budget quiz.

That concludes our live coverage of the Budget – one of the most eventful we can remember. We will continue unpacking what the Budget will mean for you, so keep a close eye on the MoneyWeek website. Sign up to the MoneyWeek newsletter to get the top stories delivered directly to your inbox.

Thank you for joining us.

The state pension triple lock is estimated to cost the government around £15.5 billion by 2030, putting the policy under intense pressure with many industry experts calling for it to be scrapped. From April 2026, pensioners will get an above-inflation state pension boost of 4.8%, thanks to the triple lock.

The mechanism is considered generous and expensive. For a desperate chancellor, Rachel Reeves, who needs to plug an estimated £20 billion deficit, removing the triple lock could be an easy way to free up cash.

But Steve Webb, who was the pensions minister when the triple lock was introduced in 2012 under the Conservative–Liberal Democrat coalition government, argues that it helps tackle pensioner poverty and it is right that the policy stays put.

Speaking on the latest episode of MoneyWeek Talks – which can be watched on YouTube or downloaded on any podcast platform – Webb says: “I became pensions minister in 2010. But in the previous 30 years, the state pension had been falling in value relative to what people earn, so it just went up with inflation most of the time.

“But the problem with that is if you earn and earn and then stop earning, then the thing you fall onto when you stop earning needs to be connected to some proportion of what you were earning. Otherwise, you just fall off a cliff and your standard of living crashes. So, the state pension needs to be pegged to a proportion of what people are earning and for 30 years, [prior to the triple lock] that had not happened.”

Webb, who is now a partner at consulting firm LCP, argued that before the triple lock, the state pension was getting worse relative to what people were used to before they retired.

“So, the point of more generous indexation post 2010 was to undo 30 years of damage.

“I’m not embarrassed or ashamed; I am proud of the fact that the state pension has been over-indexed, so we link it now to the best of growth in wages, growth in prices or 2.5%. This has nudged up the state pension a bit, relative to the average wage.”

The UK state pension is the least generous in the G7 group of the world's most advanced economies, with UK retirees receiving around 22% of average earnings from the state pension, much lower than continental neighbour France (with 58%) and Italy (76%). Webb says he does not think the triple lock system will last forever, but for now, it is there to do a job.

The triple lock: a boost for pensioners

In April 2026, 13 million pensioners will benefit from an above-inflation rise to the state pension, thanks to the triple lock. For those getting the full new state pension, it’s worth £550 a year. The increase is an extra £120 compared to what it would have been if it had been uprated by inflation only.

The rate of the full new state pension is expected to increase to just over £240 a week.

The full basic state pension is set to rise by around an extra £440 a year.

“There is an argument that the triple lock is a sop to the grey vote, this is all about older people, and that young people should not have to pay for this, but they [young people] need a good state pension, don’t they?” Webb says on the podcast.

In a report earlier this year, the Office for Budget Responsibility pointed out that public finances are exposed to inflation shocks and earnings growth – that, with an aging population, means state pension spending, after health, was the second-largest source of upward pressure on government spending.

Labour has so far pledged not to touch the triple lock in this Parliament, but its future could still be at risk in the coming years. Plus, we have seen many U-turns on policies from Labour, raising fears the triple lock could well one day be on the cards as Reeves continues to face cost pressure.

In case you missed it, the first podcast episode of MoneyWeek Talks with Rishi Sunak is also available to watch or listen to now.

Millions more Brits would face a significant fall in their standard of living when they retire if the state pension triple lock were to be scrapped, according to new figures. The number of those facing a severe shortfall could be as high as 26.1 million.

Already, 14.6 million working age people in the UK are believed to be under-saving for retirement, according to the Department for Work and Pensions (DWP) – meaning they can expect a big drop off in the lifestyle they can afford pre and post work.

But this widely used figure assumes the state pension triple lock – where the state pension rises every year by the higher of inflation, wage growth or 2.5% – will continue for the next 50 years.

The state pension, currently £11,973 or £230.25 per week for those getting the full new state pension, is the bedrock of many current retirees’ retirement income. However critics say the triple lock is unaffordable and should be switched to a double lock system of only rising by inflation or wage growth.

Now new figures from a Freedom of Information request to the DWP have revealed the impact hypothetically dropping the triple lock would make.

Compared with 14.6 million under-saving on the official figures (43% of working age people), this would rise to 19 million facing a significant shortfall with an earnings link (56%) and as many as 26.1 million (77%) with an inflation link on the state pension.

The FOI also revealed figures for how many people would fail to get even the ‘minimum’ retirement income standard set by Pensions UK – currently £13,400 per year for a single person.

This rises from 4.6 million under the triple lock to 6 million under an earnings link and as many as 11.7 million under an inflation link – roughly one in three of today’s workers.

Steve Webb, former pensions minister and current partner at pension consultancy LCP, who obtained the data via the FOI, said: “These shocking figures reveal that the true state of under-saving for retirement in Britain is far greater than has previously been admitted.

“Very few people expect the triple lock to continue for another 50 years, yet this is the basis on which the government has so far published estimates. If the triple lock were to be replaced by an earnings link, millions more people would face a sharp drop in their standard of living when they retire.

“And a prices link, as was the policy until 2010, would see around one in three of today’s workers set to retire short of even a bare ‘minimum’ standard of living.”

How much do you need in retirement?

The Department for Work and Pensions' FOI provides three benchmarks for how much people might need in retirement:

1. A ‘target replacement rate’ – basically that the median earner should be able to replace about 67% of their pre-retirement income when they retire; the lowest earners need to replace 80% of their income post-retirement on this benchmark, and the highest earners need to replace 50%.

2. The ‘minimum’ benchmark set by Pensions UK (previously the PLSA) for a very basic retirement – estimated to be £13,400 for a single person.

3. The ‘moderate’ benchmark set by Pensions UK for a ‘middling’ retirement – estimated to be £31,700 a year.

The table below shows DWP’s estimates for how many people are under-saving relative to these benchmarks. The first row is the figure published in July 2025, based on the triple lock continuing indefinitely.

Rows two and three, based on the FOI, show what the figures would be if the pension were instead linked to average earnings or the Consumer Prices Index (CPI).

Sources: Triple lock figures from DWP, Analysis of Future Pension Incomes 2025. Other figures from Steve Webb FOI, and author’s calculations.

We look at how much you need saved for a comfortable retirement in a separate article.

Budget pension raid?

These latest figures are likely to make for uncomfortable reading for chancellor Rachel Reeves ahead of her upcoming Budget on 26 November.

While rumours she could cut the amount of tax-free cash pensioners can take, or limit tax relief, seem to have been quashed, speculation has since pointed to her tightening the rules on pension salary sacrifice schemes, with a potential £2,000 a year cap.

“It seems to me that we are living in a bit of a ‘fool’s paradise’ with regard to the scale of the under-saving crisis – something that a Budget tax raid on pensions, via a cap on salary sacrifice, is likely to make worse,” said Webb.

“Against this backdrop, the chancellor should be taking measures in the Budget to boost pension saving, not undermine it.”

Single pensioners reliant on just the full new state pension would, in theory, run out of money this weekend if their spending aligns with recognised minimum living standards, analysis suggests.

The full new state pension is £11,973 in 2025/26. But a single pensioner requires an annual income of £13,400 to achieve the ‘minimum’ Pensions UK Retirement Living Standards.

Spreading both the full new state pension and this ‘minimum’ expenditure evenly across a twelve-month period leaves a shortfall of £1,427 a year, according to analysis by retirement firm Just.

On this basis, the state pension theoretically runs out on 22 November this year – known as ‘state pension shortfall day’. Under this modelling, from this day onward to the end of the year, retirees would have to fall back on private income – like a workplace pension or Sipp (self-invested personal pension) or other savings like ISAs to bridge the gap left by their state pension. In reality, the state pension is paid every four weeks.

Alternatively, those reliant solely on the state pension – some 1.2 million UK pensioners, according to research in 2023 by Just – would have to eke the payment out at a level below Pensions UK’s minimum Retirement Living Standards in order to make it last the whole year.

Pensions UK defines the ‘minimum’ Retirement Living Standard as covering all of a pensioner’s needs, with some left over for fun and social occasions, including a one week holiday in the UK, eating out about once a month and some affordable leisure activities about twice a week.

Stephen Lowe, group communications director at Just Group, said: “In a year in which the government launched both a State Pension Age Review and a Commission to consider pensions adequacy, Saturday 22 November marks the day in the year when a single pensioner living to a ‘minimum’ standard of living would theoretically run out of money if their only source of retirement income was the state pension.”

Who is dependent on the state pension?

Over a million retired households in the UK are largely dependent on the state pension for their retirement income, according to analysis of Office for National Statistics (ONS) data by Just in 2023.

The data reveals 1.2 million retired households are “mainly reliant” on the state pension,

defined by the ONS as a household that has at least three quarters of its total income provided by the state pension or other similar pension-related state benefits.

Single pensioners account for the majority of these households largely reliant on state pension income, with a worrying gender imbalance showing that three times as many women (580,000) as men (180,000) rely primarily on the state pension.

Two-person retired households account for around 450,000 households largely reliant on state pension.

How much do I need for a comfortable retirement?

Pensions UK, formerly the Pensions and Lifetime and Savings Association (PLSA) regularly puts out figures showing how much it costs to fund a minimum, moderate and comfortable level of retirement.

While Pension UK estimates a single person needs £13,400 for a minimum standard, for a moderate standard of retirement living this increases to £31,700 a year and for a comfortable retirement it jumps again to £43,800.

The figures are for an estimated expenditure, not an income. They assume you own your own home with no mortgage – so you may need to add or reduce other costs depending on your circumstances, such as mortgage, rent or social care costs and any income tax on your pension.

While the figures are only a guide, they show retirees would have to find significantly more annual income above the state pension to achieve the higher ‘moderate’ or ‘comfortable’ Retirement Living Standards.

Pensioners aspiring to the ‘moderate’ or ‘comfortable’ Retirement Living Standards will need to save significantly more to generate the income to fund expenditure of £19,727 and £31,927 a year, respectively. This assumes they get the full new state pension.

Those who only have retirement income from the full new state pension would face running out of money much earlier in the year if their spending was aligned with these two higher Retirement Living Standards.

Lowe added: “The state pension has seen significant increases in recent years and provides a solid foundation of income in later-life which, as this research shows, is likely to cover the majority of retirees’ essential spending.

"However, it is clear that people will need to hold a substantial amount in pensions or other savings to top up the state pension in order to achieve the lifestyle in retirement many may want.”

The state pension age should rise by one year every decade and Brits should only expect to get payments for a limited number of years, for example two decades, a former pensions minister has told the government. The proposal would be the biggest shake-up in the state pension’s history if it went ahead.

In a radical departure from the current system of guaranteed payments for life from state pension age, the suggested reforms are the brain child of Steve Webb, who was pensions minister from 2010 to 2015 in the coalition government under David Cameron, and who is now a partner at pension consultancy LCP.

While there’s no guarantee the idea would be implemented, the case for the changes has been fed into the government’s ongoing review of the state pension age – which examines whether the state pension age needs to rise further and faster than planned to remain affordable – and Webb said: “We have already had interest in the ideas from within the government.”

LCP’s analysis has found “the length of ‘retirements’ these days is a historical anomaly, especially for men”, said Webb. Brits who retire now can draw the state pension from age 66, and in some cases can spend up to a third of their life retired. “It is simply unsustainable to ‘lock in’ retirements of this length,” Webb added.

He blamed a “total failure” of governments in the 20th century to adjust pension ages to reflect “massive” improvements in life expectancy, meaning “retirements have got longer and longer” and are now at levels that cannot be supported by the taxes of the working age population.

“We therefore advocate a progressive increase in state pension ages, increasing by one year every 10 years for the foreseeable future, to get things back into balance, whilst giving people fair notice,” Webb said.

“Our view is that the system should target a set number of years – for example 20 years – as the expected length of time receiving a state pension, and this should not, at least for now, increase as life expectancy increases.”

However as part of his proposals Webb suggested a new ‘guaranteed period’ of five years – so, for the first time, even people for whom life expectancy is lower get something back.

“Those who have paid into the system all of their lives would be guaranteed that they or their heirs would get a minimum payout once they start drawing a pension. This would be a concrete way of addressing concerns over unfairness each time state pension ages are increased”, said Webb.

For women, the recent six year increase in the pension age, from age 60 to 66, has resulted in a fall in their length of retirement – a point currently still being fought over by women born in the 1950s known as the Waspi group – Webb acknowledged, though women’s retirements remain longer than men’s because women live longer on average.

How much does the state pension cost?

Successive governments have failed to tackle the issue of the outsized expense of the state pension, which is made more costly by an ageing population and increases every year under the triple lock.

In 2024/25 an estimated £166 billion of Department for Work and Pensions (DWP) benefit spending was directed at pensioners – around 58% of all benefit spending in Great Britain, according to government figures. Within that total, state pensions accounted for £138 billion (83%).

One key measure used by the government to assess the sustainability of the state pension is the proportion of adult life people are spending in retirement beyond state pension age.

The LCP paper showed this proportion has been going up, largely because throughout the whole of the 20th century there was no movement in state pension ages – while life expectancy for young adults in that time rose by 17 years, the state pension age did not rise at all.

The government’s original plan was to set state pension ages so people could expect to spend up to one third of their adult life in retirement. But LCP’s analysis argued this would be unsustainable.

Instead, LCP has made the case that the best way to put the state pension funding onto a firmer footing would be to set state pension ages so people could, on average, expect to receive a pension for a fixed period such as twenty years.

“This means that as life expectancies improve, retirements will stay the same length but working lives will gradually lengthen, thereby making the system more affordable,” said Webb.

One of the aspects the government’s review of the state pension age will explore is whether it should automatically increase in line with rising life expectancy.

The consultation, launched in August and closed in October, will now assess the "merits" of implementing automatic adjustments to strengthen government finances, as well as looking at how the state pension age can manage “the long-term sustainability of the state pension”.

The UK ranks lowest among wealthy G7 countries across three key measures of state pension generosity, according to new analysis.

UK retirees receive just over a fifth (22%) of average earnings from the state pension – the lowest in the G7 group of the world’s most advanced economies, and much lower than continental neighbour France (with 58%), and Italy (76%).

Other major economies also provide significantly higher levels of pension income support – and for longer – the research by investment platform Fidelity International found.

In France and Italy more than 70% of retirees’ income comes from public pensions, but in the UK this figure falls to just 40%, placing far greater emphasis on private saving to ensure a comfortable retirement.

The analysis showed a clear trade-off: the UK’s relatively lighter tax burden on the one hand versus higher social security contributions in countries such as France and Italy, where state pensions are more generous.

Marianna Hunt, personal finance specialist at Fidelity International, said: “These gaps reflect very different approaches to retirement provision. In the UK, the state pension acts as a foundation or top-up, while in France and Italy it represents the mainstay of retirement income.

“That means, in the UK, it is critical for individuals to save into private and workplace pensions to secure their financial future.”

We look at ways to boost your pension in a separate article.

How do G7 countries compare on pensions?

Pension systems vary widely in structure and type across countries, making comparisons notoriously difficult. To provide a consistent benchmark, the analysis focused on comparing three measures:

1. The level of state pension received relative to average earnings, assuming a full career from age 22. Both pension and salary figures are calculated before tax. This is the ‘gross replacement ratio’ for an average worker.
2. Expected number of years to receive the state pension – based on the state pension age (for someone born in 1960) and average female life expectancy at age 65.
3. Government spending on old-age pensions as a percentage of GDP – an indicator of the weight each country places on state provision.

The findings show significant disparities across the world’s richest nations when judged by these three state pension metrics and how much state pension UK retirees will get.

Source: Fidelity. For those born in 1960, the UK state pension age ranges from 66 to 66 years and nine months, Fidelity used the mid-year average (66.3 years).

How long will you receive the state pension?

It's not just the level of state pension received to relative to average earnings that's unequal across the G7. How long retirees can expect to receive the state pension is another metric in which the UK lags.

In France, it’s almost 27 years, compared with just under 19 years in the US. Longer life expectancy in Japan means more than 24 years of payments, while the UK sits towards the lower end of the pack at 20 years.

On healthy life expectancy – the time spent in good health after retirement – here too, France and Japan lead the pack; retirees in these countries can expect around 16 healthy years in receipt of the state pension.

Meanwhile, in the UK, Germany and Italy, retirees should expect fewer than 12 healthy years of state pension and, in the US, fewer than nine.

Source Fidelity: Data on healthy life expectancy from the World Health Organisation: Healthy life expectancy (HALE) at age 60 (years)

Hunt said: “Our research shows it’s not just how long people live in retirement that matters, but how many of those years are spent in good health. Those years are when people are most likely to travel, pursue hobbies and enjoy the lifestyle they’ve worked for.

“For UK savers, it underlines the importance of building strong private and workplace pensions to make the most of those vital years or even retire earlier than state pension age, if possible, to enjoy as many healthy years as possible.”

How does the UK state pension compare overall?

Looking across three measures – replacement rate, years receiving the state pension, and government spending – the UK ranks lowest among the G7. France performs best overall, followed closely by Italy.

Hunt said: “It’s important to be cautious when drawing direct parallels – every system has its own rules and funding mechanisms. In the UK, for example, today’s state pension is largely funded through National Insurance contributions, whereas in Italy employees contribute around nine to 11% of their salary towards social security, which also covers pensions and other benefits.”

The fact the UK spends less on state pensions as a percentage of GDP compared to other countries could be seen as a positive in some ways, she said.

This is because, for UK workers, the state pension is less of a tax burden than it might be in other countries – although the cost of state pensions in the UK is rising because of the generous ‘triple lock’ guarantee.

“The key thing for the UK is that people need to be very aware the onus is on them to make up the shortfall. The good news is that, by acting early, with even small increases to contributions, people can put themselves in a much stronger position to enjoy the retirement they want.”

How to boost your pension

The state pension makes up the bedrock of many UK retirees’ pensions. But by providing a much lower level of income than other comparable countries, there is more onus on Brits to save into a workplace pension or self-invested personal pension (Sipp) to ensure a decent standard of living in retirement.

Small changes can have a significant impact on a final retirement pot. Based on a retirement age of 68, for a 45-year-old earning the UK’s average full-time salary of £37,430, raising contributions by just 1% could add more than £22,000 to their retirement pot, according to Fidelity’s online ‘Power of Small Amounts’ calculator.

Larger increases bring even greater benefits. For younger savers, the effect is even more powerful thanks to compounding over a longer time horizon.

Calculated using Fidelity International’s Power of Small amounts calculator.

Hunt said: “Our research shows that the UK’s state pension provides a much lower level of income compared with many other G7 nations, which means the responsibility for funding retirement falls more heavily on individuals.

“This is where private and workplace pensions play such a critical role. The good news is that small, consistent changes can make a big difference. For UK savers, taking steps now to build stronger pension savings is the best way to make the most of their healthiest years and secure the retirement they want.”

Pensioners are set to enjoy a bumper 4.8% boost to their state pension payments next April, due to the triple lock mechanism.

It means those receiving the full new state pension will get an extra £11.05 a week, lifting their payment to £241.30, or about £12,548 a year.

Under the triple lock, the state pension increases each April by the highest of September’s Consumer Prices Index (CPI) measure of inflation, average earnings growth from May to July, or 2.5%.

CPI inflation for September was published today (22 October). Coming in at 3.8%, it is below the earnings growth figure for May to July, which was 4.8%. This means 4.8% is the highest of the triple lock measures.

Chancellor Rachel Reeves will likely confirm the 4.8% uplift in next month’s Autumn Budget.

Rachel Vahey, head of public policy at AJ Bell, notes that the inflation-busting increase will put “pensioners in a mood to celebrate”, but warns that the government could face more pressure to address concerns over the long-term sustainability of the triple lock.

An annual payment of £12,548 puts the full new state pension above £12,000 for the first time, and just £22 below the frozen personal allowance (£12,570).

Maike Currie, vice president of personal finance at PensionBee, comments: “While not every pensioner receives exactly £12,548, many retired pensioners on the full new state pension could find themselves paying income tax on it the following year.”

How much will the state pension rise by?

The new state pension is paid to men born on or after 6 April 1951 and women born on or after 6 April 1953.

A 4.8% increase means someone receiving the full new state pension will see their weekly payment rise from £230.25 (around £11,973 per year) to £241.30 (around £12,548 per year) in April 2026.

The basic state pension, paid to older pensioners, should increase from £176.45 a week (around £9,175 per year) to £184.90 (around £9,615).

Note that people on the basic state pension may not receive the full triple lock increase on their entire pension payment.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, explains: “While the base payment rises in line with the triple lock, extra payments such as the additional state pension will rise in line with inflation so those elements will increase by 3.8% next year.”

Will retirees have to pay tax on their state pension?

Many pensioners already pay tax on their income. The total number of taxpayers over the state pension age is expected to rise to 8.7 million – a two million increase since 2021.

An extra 420,000 retirees will have to start paying income tax in 2025-26, according to HMRC data.

However, while these figures reflect retirees’ total income (so, including workplace and personal pensions and other income such as from buy-to-let), some of these people are paying income tax on their state pension.

This is because they may have a bigger payout due to delaying taking their state pension, or they have large amounts of additional state pension.

The pension consultancy LCP estimates that more than one in five of all pensioners have state pensions in excess of the tax-free personal allowance of £12,570, and therefore are already subject to tax.

A 4.8% boost coming up in April will likely cause more pensioners to pay tax on their state pension, and tip the new full annual payment of £12,548 dangerously close to the point where pensioners receiving that amount must pay income tax on the benefit.

Assuming the personal allowance remains frozen (and the government has said it will be until at least 2028), the full state pension will exceed the personal allowance of £12,570 by 2027/28 if the benefit increases by the minimum 2.5% in April 2027, according to AJ Bell.

Claire Trott, head of advice at St. James’s Place, points out that a tax grab on pensioners’ incomes means they won’t enjoy the full 4.8% triple lock uplift.

She explains: “A 4.8% rise is something of a double-edged sword. While the boost will be welcomed by many, it also pushes the new state pension to just below the personal allowance, and risks nudging many more people into paying tax on any other additional income they have.

“As a result, someone with other income of £10,000 will effectively only see an increase in their take-home income of just shy of 2.3% due to the additional taxation, which could result in unexpected tax bills for unassuming pensioners.”

How sustainable is the triple lock?

The government has repeatedly committed to the triple lock for the remainder of this parliament.

But an increase of 4.8% is slightly more than the 4.6% assumed by the Office for Budget Responsibility in its March 2025 “Economic and Fiscal Outlook”, and will pile more pressure on a government struggling to balance the books.

Currie at PensionBee comments: “An ageing population and increasing life expectancy, combined with the generosity of the triple lock, place significant pressure on the UK’s public finances.

“Today’s inflation figures simply underscore the fiscal tightrope chancellor Rachel Reeves must walk ahead of the Budget on 26 November.”

Morrissey at Hargreaves Lansdown adds that soaring numbers of people living into their 90s - and beyond - plus the spiralling cost of the state pension means we could see the state pension age up.

The government recently ordered a review into the state pension age. “We won’t hear back from the review for some time, but we could see further increases to the state pension age put on the table,” notes Morrissey.

“We will also see increased debate as to the long-term viability of the triple lock. The government had pledged to keep it in place for the remainder of this parliament but longer term we could see changes on the horizon.”

According to research by Standard Life, less than a third (29%) of Brits think the triple lock will still be in place when they reach retirement, with Gen X among the most sceptical: just one in five (21%) expect it to remain intact.

The time gap between when Brits want to retire and when they actually think they will be able to has widened in the last year, according to a new report, as rising living costs, pension insecurity and ongoing financial pressures push retirement further out.

Brits’ preferred pension age remains at 62, the research by Standard Life found, unchanged from last year. In 2023, it was 61. However, on average, people don’t expect to be able to retire until 67. This is an increase from 66 last year, widening the average predicted gap to five years.

The picture – which takes account of the retirement attitudes of 6,000 people – is mixed, however, with different regions and lifestyle factors having a big impact on post-work expectations.

Women, renters and people in the North East face the longest delays between when they want to retire and when they believe they will be able to. The average gap increases to more than six years for renters and for those with no pension savings, for example.

We look at how much you need to retire comfortably and how to boost pension savings in separate articles.

Catherine Foot, director of the Standard Life Centre for the Future of Retirement, said: “The fact that people face a growing gap between their retirement hopes and expectations reflects the financial pressures and uncertainties many households face.

“There are some clear variations depending on where you live, your level of income, the amount of pension savings you have, and whether or not you own your own home.”

Why are we working longer?

An analysis of economic activity among the over-50s by the Department for Work and Pensions by retirement company Just showed the average age of exiting the labour market has risen to age 65.8 for men and age 64.7 years for women.

These rates compare to record lows of around age 63 for men and age 61 for women around the year 2000.

Higher consumer prices – inflation is currently running at 3.8%, almost double the Bank of England’s target – and uncertainty around the wider economy are having a dampening effect on people’s outlook for the future, according to Standard Life, pushing them to work longer.

Only three in ten (30%) of UK adults said they are currently living comfortably, and despite half (53%) worrying they aren’t saving enough for retirement, only 15% have pension saving as one of their top financial priorities for the year. Almost half (47%) feel their retirement finances are outside their control.

State pension fears

The scheduled rise in the state pension age from 66 to 67 between 2026 and 2028 is a possible factor in the shift in expectation to not retiring until age 67. Yet the Standard Life report also showed public awareness of the state pension age is low – with less than one in five (18%), out of 6,000 respondents, correctly identifying the current state pension age of 66.

Trust is also low that the state pension – the bedrock of the current generation’s retirement planning – will still work the same way it does today when the next generations come to retire.

Less than a third (29%) think the triple lock will still be in place when they reach retirement, and only a little over half (51%) think the state pension will be available for all by the time they retire, as it is currently.

What age will you retire?

The average retirement expectation gap across the UK is five years – 4.1 for men and 5.4 for women – but it varies widely depending on where you live, how much you earn, and whether you own or rent your home.

Regionally, the gap is widest in the North East (5.9 years) and Yorkshire & the Humber (5.3 years), and it is the narrowest in London (3.5 years) – creating a regional difference of 2.4 years.

The East of England and the South East both have a retirement expectation gap of 5.3 years, and Scotland and Wales both face a 4.9 year gap. The West Midlands, at 4.7 years, has the second-narrowest gap.

One of the biggest factors affecting how much of a delay you face in retiring is whether you own your own home. Those who are renting face a gap of 6.1 years, compared to 5.2 years for homeowners paying off a mortgage, and just 2.4 years for outright owners.

Income also plays a big role. For households with an annual income under £30,000, the retirement expectation gap is 6.2 years; it narrows to 5.1 years for those earning £30,000 to £50,000, 4.6 years for those earning £50,000 to £100,000, and just two years for the highest earners.

Another deciding issue in when you can expect to retire is the type of pension you have – if any. Those with no pension savings face a 6.5 year retirement expectation gap, compared with 4.7 years for those with defined contribution pensions, 2.5 years for those with defined benefit pensions, and 2.1 years for those with personal pensions.

How to retire earlier

Getting to grips with retirement planning – and finding even small ways to boost your pension – can help you fight back against a number of these challenges and set you on the path to retiring earlier.

People who do something about their retirement planning tend to have a smaller retirement expectation gap, Standard Life found, even at lower income levels.

For example, despite being the lowest-income households, those who earn under £30,000 and say they have done ‘a great deal’ of retirement planning, have a gap of just 4.7 years compared to those who have done no planning, where it is more than eight years (8.1).

Amongst the highest-income households, financial planning closes the gap from 4.2 years to less than a year (0.9) for those who have planned for their retirement.

For those able to do so, even a modest bump in monthly pension contributions can also go a long way towards helping people retire when they want to.

For example, someone who began work on a salary of £25,000 per year and paid the minimum auto-enrolment contributions (5% employee, 3% employer) from the age of 22 could build a total retirement fund of £201,000 by the age of 67.

But they could potentially retire on a slightly larger pot of £204,000 at the average preferred retirement age of 62 if they increased their monthly contributions by just 2% from the age of 22.

They would, however, need to pay for more years of retirement with that pot, including bridging the gap to their state pension age.

Foot said: “Those facing a gap between their retirement hopes and expectations can take meaningful steps to narrow it with the right support, however advice and guidance plays a crucial role here too – from encouraging people to plan earlier and save more consistently if they can, to helping people find ways to manage financially in the years before the state pension begins.”

Millions of old state pension records are set to be deleted – a move which would make it ‘virtually impossible’ to correct past errors in state pension payments, a former pensions minister has warned.

There are thought to be tens of thousands of people affected by historic state pension errors.

The Department for Work & Pensions (DWP) has admitted to multiple errors in state pension payments in recent years, and in some cases the people affected had died before things could be put right.

An estimated £1 billion in ‘home responsibilities protection’ (HRP) for state pensions was underpaid to people between 1978 and 2010, for example, a mistake primarily affecting women who took time off work to care for children or disabled adults.

Out of an estimated 194,000 people, mostly women, affected by errors relating to home responsibilities protection, 43,000 died having never benefited from HRP. These deceased women were underpaid an estimated £127 million. HRP was replaced by National Insurance credits in 2010.

Errors can be fixed even after someone has died, with the money due being paid to the heirs. But once DWP pension records have been deleted this becomes almost impossible, unless the family have very detailed historic records about the person who died.

State pension errors

A new Freedom of Information request by Steve Webb, former pensions minister and now a partner at consultancy LCP, says there is now a risk millions of historic state pension records will be deleted, leaving people who are owed money due to errors nowhere to turn to get justice.

Normally, pension records are deleted by the DWP four years after someone dies. This practice was put on hold in 2021 while the Department investigated another batch of state pension errors (affecting married women, widows and the over 80s).

With that correction exercise now complete, there is a risk records all the way back to 2017 will now be wiped, making it impossible for families to get justice for their late loved one.

Webb, who has been investigating the issue of state pension payment errors, found in his FOI that while the embargo on deletions is currently still in place, there is no guarantee that will remain the case.

The FOI reply stated: “Once the embargo is lifted, then we will look at deletion of records that are no longer required and re-apply the retention policy”.

‘Essential no more records are deleted’

With roughly 500,000 people over state pension age dying each year, deleting data for deaths in 2017 to 2020 inclusive (which were originally retained but are more than four years old), would result in roughly 2 million records being deleted.

Some of these would include women who missed out on HRP and whose family could no longer get things put right, Webb said.

He has written to the Permanent Secretary at the DWP, Sir Peter Schofield, asking him to ensure that these records are retained for as long as they may be needed to clear up any outstanding state pension errors.

Webb said: “I often hear from people who are trying to sort out errors in the state pension of loved ones who are no longer with us, but are told nothing can be done because the records have been destroyed.

“Whilst we cannot get back the records that have already been deleted, it is essential that DWP does not now delete millions more records, especially given the live process of trying to fix errors around Home Responsibilities Protection.

“The least we can do for people who were never paid the right pension is to do all we can to make sure that at least their families get the money they missed out on.”

A DWP spokesperson said: “We are committed to ensuring pensioners get the financial support they deserve and have so far reviewed over 900,000 customer records, with awards totalling over £900 million in arrears made.

“Where errors do occur we are committed to resolving them, which is why we have paused deleting state pension records.”

Women in their late 50s that are out of employment have been hardest-hit by state pension age increases, a new study has found, as the government reviews whether it should rise faster.

The state pension age is currently 66 for men and women. It is due to rise to 67 between 2026 and 2027, and to 68 in 2044 to 2046. But the effects of previous state pension age increases have not been felt equally, according to research by the Institute of Fiscal Studies (IFS).

Women already out of employment in their late 50s have been particularly hard-hit by the rise in state pension age from 60 to 66 that occurred between 2010 and 2020, it found, because of the impact of how much state pension they will get.

On average these women experience a bigger drop in income as a result of state pension age increases. They are also more likely to have a low income, to be in poor health or to have a disability.

Impact on women of state pension age rise

A key reason state pension age increases have particularly hit the incomes of women already out of employment in their late 50s was that very few re-entered paid work in response to the reform, IFS’s research found.

In contrast, for those who were in paid work in their late 50s, their employment rate at ages 60 to 64 jumped by 16 percentage points, as significant numbers delayed their retirement.

This means falls in average income at ages 60 to 64 as a result of the increase in the state pension age were larger (a fall of £81 per week) for women who were out of employment in their late 50s than for those who were still in paid work in their late 50s (a fall of £42 per week).

Consequently the likelihood of participating in social activities – such as visiting museums or theatres, or being part of a sports or social club – fell by 8 percentage points (from a baseline of 53% pre-reform) among all women affected by the rises in the state pension age.

While state pension age rises led to a big boost in employment, they also pushed more people into income poverty, the IFS pointed out.

Heidi Karjalainen, senior research economist at IFS and an author of the report, said: “These findings do not mean that the state pension age should not continue to rise. Instead, they highlight the importance of enhanced support for those most harmed by increasing the state pension age.”

Karjalainen continued: “In general, helping people remain in, or return to, paid work at older ages, while providing additional targeted financial support for those who cannot, can also help maintain public support for future increases.”

These issues need to be carefully considered by the third review of the state pension age, which the government launched in August, she added.

Could the state pension age rise to 70?

The government’s review of the state pension age will explore whether it should automatically increase in line with rising life expectancy, potentially pushing the state pension age up to 70.

It will look at the "merits" of implementing automatic adjustments to strengthen government finances, as well as assessing how the state pension age can manage “the long-term sustainability of the state pension”.

The full new state pension looks set to increase by just over £560 a year next April, an inflation-beating rise that raises more questions about its affordability for the government – while it ushers in a new era where pensioners relying solely on the state pension will pay income tax for the first time from 2027.

The state pension age review will examine the experience of other countries that already automatically link payments to life expectancy, including Denmark, which recently raised its retirement age to 70, which will kick in by 2040.

Denmark has tied the official retirement age to life expectancy since 2006 and is one of nine OECD countries to do so.

There is no official retirement age in the UK – people can usually continue working for as long as they wish – but many people retire once they reach state pension age or before.

Delaying retirement – working longer

Raising the state pension age will encourage – or force – many people who can not afford to retire without the state pension income to work longer.

Catherine Foot, director of the Standard Life Centre for the Future of Retirement, commenting on the IFS’s report, said ensuring that people nearing state retirement age can remain in work “is essential to many people’s retirement incomes as well as the country’s economic growth prospects”.

“A combination of longer lives, rising cost pressures and economic uncertainty mean it’s never been more important to ensure workers don’t fall out of employment before they reach state pension age. One quarter of all 60 to 65-year-olds live in poverty and good quality, satisfying employment can help build financial resilience for later life,” she said.

The government’s growth agenda also relies on retaining older workers, she pointed out.

Over 50s leaving the workforce has a major impact on the output of the Industrial Strategy sectors, and an estimated £31 billion of output is lost each year from individuals retiring early by leaving before state pension age.

The full new state pension looks set to increase by more than expected in April 2026, ushering in a new era where pensioners relying solely on the state pension will pay income tax for the first time.

The significant increase expected from April is due to a bumper rise in earnings. Average wage growth (including bonuses) in the three months to July 2025 had been thought to have risen by 4.7%, data published last month showed. But today’s employment figure saw the average earnings growth for May to July revised up to 4.8%. The July earnings figure, published in September, is usually used as the earnings part of the triple lock.

On the basis of this new earnings figure, this would take the full new state pension to around £12,590 next April for 2026/27 – and for the first time rise above the income tax personal allowance £12,570. This means, for the first time, anyone relying solely on the full new state pension in retirement will have to pay income tax.

The Department for Work and Pensions calculates the state pension increase by applying the uprating to the weekly total, converting to a day rate and then multiplying by 365.25.

The latest prices data, out in September, which showed inflation held at 3.8% in August, also suggested pensioners are likely to receive another inflation-beating boost to their annual state pension payment.

David Brooks, head of policy at independent consultancy Broadstone, said: “For the first time ever, it looks likely that the state pension will exceed the personal allowance meaning those in receipt of the full new state pension will be taxed on that income.

“It is bad news for the chancellor who will have to fund the increased cost of providing this benefit to pensioners next year. With the state pension age review ongoing, it is a timely reminder of the accelerating cost of the triple lock and that amendments appear inevitable looking to the future.

“In the short-term, budgetary pressures remain tight and so, as we head towards winter, the news will be positive for those pensioners who rely on the state pension to provide the majority of their income.”

With the triple lock formula guaranteeing an increase of at least 2.5% every year, the headline rate of the new state pension is certain to exceed the current income tax threshold even further by the 2027/28 tax year.

An April 2026 increase of 4.8%, followed by a further increase of (at least) 2.5%, would take the full new state pension to more than £12,850 in April 2027 – above the expected level of the threshold where income tax becomes due.

Jon Greer, head of retirement policy at Quilter, said the cost of the triple lock is in the spotlight, “appearing increasingly out of step in the medium to long-term”.

He added: “The formula, whichever is highest of earnings growth, inflation, or 2.5%, was introduced to protect pensioners during periods of low growth and to address the state pension’s relative decline in value that had occurred in previous decades. But today, it acts as a rigid mechanism that drives up spending regardless of affordability or fairness.”

A more sustainable alternative would be a smoothed earnings link that would base annual increases on a rolling average of wage growth over three years, said Greer.

“This would reduce volatility and better align pension increases with long-term economic trends,” he said.

Alongside this, in periods where inflation is relatively high, the state pension could increase in line with prices until real earnings recover, at which point it could then revert back to its average wage growth, Greer suggested.

“Effectively, this would maintain the state pension to a benchmark proportion of average earnings. This approach offers a fairer and more predictable framework. It supports pensioners while recognising the pressures on working-age taxpayers and the need for fiscal discipline,” he said.

“Today’s figures offer short-term reassurance, but they also reinforce the case for reform. The triple lock has done its job. Now it is time to replace it with a system that is fairer, offers more certainty, and fit for the future.”

What is the triple lock?

The ’triple lock’ rule means the state pension will rise by the highest of:

• The growth in average earnings (including bonuses) in the three months to July – this figure is 4.8%.
• The growth in CPI inflation in the year to September;
• A floor of 2.5%, which will not be relevant this year.

Inflation in the year to August held at 3.8%, official figures published in September showed, in line with July, which was also 3.8%. The September figure which feeds into the triple lock will be published in mid October. If inflation continues to rise this could exceed the earnings growth figure, though the Bank of England recently estimated CPI would not go above 4% this year.

Will the triple lock be scrapped?

The government has repeatedly committed to the triple lock for the remainder of this Parliament.

But an increase of 4.8% in the headline rate of the pension is actually be slightly more than the 4.6% assumed by the Office for Budget Responsibility (OBR) in its March 2025 ‘Economic and Fiscal Outlook’, which fed into its assessment of the state of the public finances at the time.

David Brooks, head of policy at independent financial services consultancy Broadstone, said: “The good news for millions of pensioners is that they will receive hundreds of pounds more income every year at a time when many still face persistent cost-of-living pressures and depend heavily on the state pension as their main income.

“At a time of strained public finances, however, the rising cost of funding this benefit will once more come under scrutiny especially given the ongoing State Pension Age Review.

“Debate over the future of the triple lock itself, means-testing or alternative funding, such as via the introduction of a national insurance contribution of some kind, is likely to intensify.”

“The debate should be around whether the increase is dictated by an earnings link or an inflation link should be a priority,” Brooks added.

Revived Pension Commission

In July, the government revived the Pensions Commission as part of a long-term plan to address the pension under-saving crisis of those due to retire in the mid-century. As part of this, the Commission will look at the relative success of automatic enrolment, contribution rates among employers and workers and solutions for the self-employed.

But the Commission also promises to look at the balance between all types of pensions.

Rachel Vahey, head of public policy at AJ Bell, said: “That could mean a review of the state pension as well, at the same time as the government launches its formal review of the state pension age.”

The state pension age will gradually increase to age 67 between 2026 and 2028. It’s also due to rise to 68 in the mid-2040s.

“It’s entirely possible – if not likely – this latest state pension age review will advocate bringing forward that increase to the late 2030s to save future governments’ money,” said Vahey.

“As the state pension grows ever closer to the frozen personal allowance threshold it could be that the government is finally forced to address the question of how much the state pension should really offer, at what age, and how it can increase payments sustainably each year,” she added.

Millions of retirees will not benefit from the state pension triple lock next April - and potentially miss out on a 4.6% uplift - new data suggests.

The triple lock ensures that the state pension rises each year by the highest of inflation, wage growth or 2.5%.

However, not all state pension payments are covered by the triple lock guarantee.

Millions of older pensioners are on the basic state pension, where the majority get an additional earnings-related pension — known as Serps or the state second pension — which is not covered by the government’s triple lock.

According to government figures, an estimated 6,574,000 pensioners will receive the state second pension in 2026/27. This payment only increases in line with inflation, rather than being boosted by the triple lock.

In contrast, new state pension and basic state pension payments are protected by the triple lock.

The latest figures show wage growth running at 4.6%, which is higher than inflation. If the 4.6% figure was used in the triple lock next April, it would hike the full new state pension by £551 to £12,524 a year. Those on the basic state pension would see their annual earnings rise to £9,634.

Steve Webb, partner at pension consultants LCP, and a former pensions minister, comments: “It often comes as a surprise to people that the different elements of their state pension can go up at different rates.

“The famous ‘triple lock’ promise applies only to the old ‘basic’ state pension and the new flat rate pension, but not to other elements of the pension such as the state second pension (often known as Serps).”

Find out more about who will miss out on the state pension triple lock

How much will the state pension rise by next year?

The annual triple lock rise is only known in October for the following April, and even then the government usually confirms the exact amount later, in its Autumn Budget.

The inflation figure in the triple lock is for the previous September, while the average wage growth data relates to May to July. Neither of these figures have been published yet.

Wage growth is currently at 4.6% and inflation is sitting at 3.8% at the moment, suggesting that the triple lock could rise in line with wage growth, if it continues to be higher than inflation.

If inflation remains at 3.8%, older pensioners receiving the state second pension are likely to only get around 80% of the triple lock uplift for that part of their pension.

Webb notes: “In a year when wages grow faster than prices, the triple locked elements of the pension will rise by slightly more than other elements.”

According to Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, it’s likely we will see a state pension triple lock increase “somewhere in the 4-4.5% ballpark for next year”.

This would mean someone on a new state pension will see their annual payments rise by around £479 to £538. Someone on a full basic state pension would see their payments rise by £367 to £413.

An increase of this size would roughly match the triple lock uplift seen in April 2025, when the state pension rose by 4.1%.

However, it’s a lot less than what we’ve seen in recent years, when the state pension rocketed by 8.5% in April 2024, and a whopping 10.1% a year prior.

Derence Lee, chief finance officer, Shepherds Friendly, comments: “Due to the extremely high levels of inflation the UK has experienced since 2020, state pensions have been increasing at a rate that some experts believe to be unsustainable in the long term.”

He adds that the new full state pension is likely to breach the tax-free personal allowance of £12,570 within the next year or two, meaning more retirees will be dragged into the tax-paying bracket.

Who doesn’t benefit from the state pension triple lock?

Currently, 6,936,000 pensioners receive the state second pension, and this payment rises with inflation, instead of the triple lock.

Government estimates show that this figure will fall to 6,574,000 in April 2026. This is due to older pensioners dying each year, which reduces the number receiving the basic state pension (and therefore the state second pension too).

A decade ago, there were about 10 million pensioners in receipt of the state second pension.

People who defer their state pension also don’t benefit from the triple lock on the extra amount that is paid to them for deferring.

The state pension increases by 5.8% for every full year you delay taking it, if you reached or will reach state pension age on or after 6 April 2016.

This extra amount then increases each year in line with CPI inflation, rather than the triple lock.

British pensioners living abroad in countries like Australia, Canada, India, New Zealand and South Africa do not have their state pensions increased with the triple lock.

This “frozen state pension” policy - which means expat pensioners in certain countries don’t see any increase to their UK state pension at all - affects about 450,000 pensioners.

Retirees are spending just over £22,000 a year on average – almost £10,000 less than the recommended cost of a moderate retirement lifestyle.

The average annual spending figure for retirees is £22,140, as calculated by wealth manager Quilter and Centre for Economics and Business Research (Cebr).

This includes gifting almost £2,500 a year to loved ones despite fears about running out of money.

Frugality – by necessity or choice – seems to be a reaction to fears that pension savings won’t last as long as they are needed. Nearly one in five retirees (18%), out of the survey of 5,001, report being very concerned about their ability to maintain their current standard of living. This rises to 29% of retirees aged under 65 with an above-median income.

We look at ways to boost your pension in a separate article.

Nevertheless, UK retirees are still extremely generous, giving almost £2,500 per year to relatives – £1,323 in gifts, with an additional £1,175 to support education. This represents over 10% of their yearly spending and an annual contribution to the UK economy of £16.1 billion.

They give a further £1,048.56 to charities each year. Gifting is also a common way to avoid inheritance tax.

Steven Levin, chief executive of Quilter, said: “Retirees aren’t just budgeting for themselves; they’re quietly propping up the next generation too.

“With nearly £2,500 a year being gifted to family and to help with education of loved ones, it’s clear many are playing a bigger economic role than they’re often given credit for.”

What does the average retiree spend money on?

Retirees’ biggest expense is still housing – including rent or mortgage and property maintenance – which costs them £188.20 a month to total £2,258.34 a year.

Second on the expenses list is groceries at £185.18 a month or £2,222.17 a year, unsurprising with rising food prices (along with air fares) helping to push UK inflation to 3.8% in July, the highest in 18-months.

But, in a reassuring development, it seems the stereotype of retirement being a time to enjoy travel is a true one for the average retiree, who spends £2,137.34 a year on holidays, according to the research.

The industry body Pensions UK recently calculated the kind of holiday retirees can afford with different-sized pension pots.

The other big discretionary spend for those who have retired is renovations and home improvements, on which they spend on average £165.44 a month, totalling £1,985.26 a year.

Perhaps more surprisingly, retirees are also spending a considerable amount repaying debt, to the tune of £131.57 a month or £1,578.88 a year.

The median retiree household income is £35,000 gross (before tax), the research found. That would be £28,719.60 after tax. However, income is not evenly spread across gender and regions.

Two-fifths (42%) of retirees in Wales, for example, report a gross income below £30,000, compared with an average of over £58,000 in London.

This leaves many retirees with very little room to save or cover unexpected expenses, after meeting their regular outgoings

The research also shows the state pension remains a critical source of income. Among those aged 70 to 74, the state pension makes up 47% of household income, jumping to 50% for those aged 80 to 84 – a key consideration for policymakers with the state pension age currently under review.

Quilter’s Levin said: “It is clear from our research that, despite the stereotype of the cash-rich Baby Boomer, too many people are over-reliant on the state pension to make ends meet. Also, too few are taking financial advice, despite the significant benefits seen by recipients.”

Source: Quilter and Cebr

The gender pension gap has been almost completely eliminated when it comes to the state pensions of people retiring today, according to new data.

A reply from the Department of Work and Pensions (DWP) to a Freedom of Information request, made by the former pensions minister Steve Webb, said “the amounts [of new state pension] for men and women are on course to be equal very shortly”.

For the most recent group of retirees for which figures are available (those reaching state pension age in the year to November 2024), the gap between what men and women receive from the new state pension has shrunk to under 1%.

According to the FOI, the average newly retired man now gets a pension of £209.95 per week, with the average newly retired woman getting £208.15 – within 1% of her male counterpart.

We look at how much state pension you will get in a separate article.

As the post-2016 ‘new’ state pension system continues to bed in, this gap is expected to close further and could even lead to a situation where women narrowly overtake men when it comes to state pensions. Both groups benefit from the triple lock.

Webb, partner at pension consultancy LCP who, as pensions minister, was the architect of the new state pension system, said: “When there is so much negative news about gaps between men and women when it comes to pensions, these figures show that things can be changed provided that there is the political will to do so.”

“There are however, far too many women who have already retired who are living on reduced pensions and I will continue to campaign for them to be treated fairly, including by rooting out all of the errors which have led to so many being underpaid for so long”.

State pension gender gap

Since the state pension was introduced in the late 1940s there has been a big difference between the typical pensions paid to men and women.

Even today, the average state pension paid to men and women who retired under the old state pension system differs greatly, with men getting an average of £217.30 compared with an average of £186.44 for the average woman.

This puts the average woman on just 86% of the pension of her male counterpart.

These figures also ignore the fact that many women on decent state pensions now are widows whose pension only rose when their husband died and who previously spent many years on a lower figure.

However, in 2016 a new state pension system was introduced and one of its specific goals was to gradually eliminate the gender pension gap in state pensions.

The new system had to be phased in gradually, not least to protect the rights people had already built up under the old system. But those transitional protections are gradually working their way out of the system, with the result that the gap between men and women is reducing with every passing year.

Private pension gender gap

While it is good news the state pension gender gap is being eliminated, it is a different story when it comes to private pensions. The government's second report on the Gender Pensions Gap paints a bleak picture for women's retirement outcomes.

It shows that over the last two years the gender pensions gap has moved sharply in the wrong direction, widening by 13 percentage points. This is based on the difference in private pension pot sizes between men and women aged 55 to 59.

Based on the latest official data, the gender pensions gap now stands at a whopping 48%, up from 35% just two years ago.

The report shows that women aged between 55 and 59, on average, can expect to have built up a pension pot of £81,000, giving an estimated annual retirement income of £6,000 from age 60. Meanwhile men will, on average, have a pension pot of £156,000 giving an estimated annual income of £11,000.

Kate Smith, head of pensions at Aegon said: "The reality of pension saving inequality really hits home as on average women will receive just over half the pension income of men. This is compounded, as women, on average, tend to live longer than men, meaning they need to save more, not less.”

The widening of the gender pension gap appears to be related to the move from defined benefit to defined contribution pension provision, Smith said, which appears to be disproportionately affecting women's retirement outcomes more than men's.

"Considering defined contribution pensions are the future for most, it's deeply concerning that the biggest gender pension gap, at 75%, is for those women aged 55 to 59 who only have defined contribution savings wealth.

“And the smallest gender pension gap at the same age is 39% for those who only hold defined benefit wealth, a type of pension arrangement which is in severe decline in the private sector.

“Unless there are radical interventions to close the gender pay gap, address labour market inequalities and societal norms, this doesn't bode well for the future of women's pension equality.”

The revived Pension Commission's remit is to consider the future of the UK's pension system, including addressing pension inequalities.

As many as one in four pensioners are unaware they could get extra income from their state pension by filling in gaps in their National Insurance record, according to new research.

A further 10% of those aged over 66 were unsure about the rules for backdating National Insurance (NI) to increase their state pension, the data from retirement specialist Just Group found.

While 4.5 million pensioners currently receive the new state pension, the latest Department for Work and Pensions (DWP) statistics showed, a huge 45% (or slightly more than two million people) do not currently get the full entitlement.

Currently the full new state pension is £11,973 for the 2025/26 tax year. But more than 200,000 pensioners receive less than 50% of the full amount, according to DWP figures.

Stephen Lowe, group communications director at retirement specialist Just Group, said the findings were a reminder people should check their National Insurance record before claiming the state pension.

“The state pension is the bedrock of retirement finances in the UK, and for many people represents the majority of their income. However, millions of people do not receive the full amount because they have not built up enough qualifying years of National Insurance contributions,” he said.

“Before people claim the state pension, we’d urge them to check if they will actually receive the full new state pension and if not to review their National Insurance record to see where they have gaps.”

If you’ve reached state pension age, it’s worth checking if you could be entitled to extra income by claiming Attendance Allowance.

How much National Insurance contributions do you need for the full state pension?

Currently, at least 35 years of qualifying National Insurance contributions are required to claim the full new state pension.

A minimum of 10 qualifying years are needed in order to receive any new state pension.

There is widespread confusion about qualifying years. Just’s research found fewer than six in 10 (57%) adults of state pension age or older knew how many years’ worth of NI contributions they need to claim the full new state pension.

But at the same time, the state pension is absolutely crucial to many pensioners’ incomes. Around one in seven (13%) over 66s said the state pension accounted for over 90% of their monthly household income, Just’s research found, with 44% saying that it represented more than half of their household income.

How can I check my National Insurance record for the state pension?

You can check your National Insurance record online to see what you’ve paid up to the start of the current tax year. You’ll also be able to see if gaps in contributions mean some years do not count towards your state pension (they are not qualifying years).

The online tool can show you if you’ll benefit from paying voluntary contributions to fill any gaps, how your state pension forecast will change if you decide to pay voluntary contributions, and if you can pay voluntary contributions online and how much this will cost. Make sure you check if you qualify for National Insurance credits before making voluntary contributions.

It will also show how much state pension you’re on track to get, as well as your state pension age.

Can I plug gaps in my National Insurance record for the state pension?

If you reached state pension age after 6 April 2016 you’ll be on the new system. Gaps in National Insurance records can be backfilled by paying for voluntary Class 3 National Insurance contributions. However these can only be made for the previous six tax years.

The rate you pay depends on which year you're buying.

£824.20 (£15.85 a week) to buy 2019/20

£795.60 (£15.30 a week) to buy 2020/21

£800.80 (£15.40 a week) to buy 2021/22

£824.20 (£15.85 a week) to buy 2022/23

£907.40 (£17.45 a week) to buy 2023/24

£907.40 (£17.45 a week) to buy 2024/25

£923 (£17.75 a week) to buy 2025/26

If you're self-employed or you're topping up a partial year, the cost will be lower.

For each year you buy you get an extra 1/35ths state pension. This could add up to £340 a year to your state pension – or £6,800 over 20 years. This means that, as long as you live at least three years after the official retirement age, you’ll get your money back.

However if you reached state pension age before 6 April 2016, you’ll be on the old pension system. This means you can’t boost the amount you get using voluntary contributions.

Is filling National Insurance gaps worth it?

The voluntary NI contributions system is generally good value when you consider that the state pension rises each year depending on whichever is the highest of 2.5%, wage growth or CPI inflation, thanks to the triple lock. In essence, the state pension becomes more valuable over time.

But the state pension age is not set in stone. While it is currently 66, it is set to rise to 67 from next year with the higher age fully implemented by April 2028. It is then expected to increase to 68 between 2044 and 2048 but speculation that this may get brought forward has been heightened in recent weeks amid concerns over the long-term sustainability of the benefit.

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: “With that in mind, for younger people in particular, it may not be worth the expense of filling the gaps as they will hit the 35-year contribution target anyway over the course of their life.”

“For them, it would be taking a real risk to buy now unless they are sure they won't make them up later, for example, because they plan to stop working for a long period, for example to go travelling.”

But the option to pay for missing years over the past six years could be useful for someone who may have just returned from a stint working overseas, for example, and is hoping to retire soon.

Ultimately, any potential gain from buying voluntary NI contributions will be wiped out if your health is poor and you are unlikely to live long enough to benefit.

“Also if you are a higher earner, for example, it might not be worth topping up your NI record as it could tip you into a higher tax bracket when you receive your state pension income,” Haine said.

Can I get National Insurance credits?

People may be able to claim National Insurance credits for free to backfill gaps in their National Insurance records, if they have been out of the workforce for various reasons such as maternity leave, unemployment, sickness or providing unpaid care.

Haine said: “You might find you have more years built up than you realise as you can also build up NI years for free by acquiring tax credits.

“Scenarios that can potentially earn NI credits include being a parent or guardian registered for child benefit for a child under 12, being on statutory sick pay, looking for work, fostering a child or caring for a sick or disabled person, being on jury service, being on maternity, paternity or adoption pay and even being wrongly imprisoned.”

If you have a child under 12, or you look after one in your family, check if National Insurance credits can be transferred to you. When Child Benefit is paid, National Insurance credits are added to the record of the person claiming it. But if that person is already working and making contributions anyway, they can ask to transfer them to you at the end of each tax year.

“While there are certain stipulations for each scenario, NI credits can often be automatically applied, so it is always wise to put in a manual claim if they are not on your record,” said Haine.

Should I top up my National Insurance record?

Calculating whether to top up can be confusing and ultimately there is no point paying for more years than you need because you won’t get that money back.

The best solution, said Haine, is to call the Government’s Future Pension Service on 0800 731 0175 to double check how many years you can buy and whether voluntary contributions will add to your state pension. Those who have already reached state pension age will need to contact the Pension Service on 0800 731 0469.

“An adviser at the Future Pensions Service can chat through this with you and offer guidance for your unique situation and whether buying a missing year will actually give your eventual state pension a bump up,” Haine said.

For those with Pension Credit queries, Citizens Advice can be a good port of call to calculate whether topping up is worth it or not.

Britons currently in their early 50s could miss out on almost £18,000 if the state pension age rise to 68 is accelerated by one year.

The state pension age will rise from 66 to 67 by April 2028, and then to 68 between 2044 and 2046, but these changes could potentially be brought forward as part of a newly announced state pension age review.

If the state pension age rise to 68 was sped up to between 2039 and 2041, it could mean a loss of one year’s full state pension payments, with those aged 51 to 53 being the first affected.

Workers aged 51 would lose £16,436, while 52-year-olds would lose £16,114, according to calculations by wealth manager Rathbones. Those aged 53 would miss out on £15,798.

This is based on the full new state pension amount of £230.25 per week (£11,973 per year) and assumes the Bank of England’s target inflation rate of 2% per year.

If the triple lock (which guarantees the state pension rises by the highest out of inflation, average earnings or 2.5% each year) is factored in, the figures would rise to approximately £17,774 for 51-year-olds, £17,340 for 52-year-olds and £16,918 for 53-year-olds.

Rebecca Williams, divisional lead of financial planning at Rathbones, warned future generations seem likely to face a “less generous” state pension than today’s retirees as longevity increases and population pressures mount.

“The situation appears particularly precarious for those in their early 50s who face the real prospect of missing out,” she added.

“We’ve seen a number of people in their late 40s and early 50s come to us seeking greater clarity on their retirement prospects.

“With shifting goalposts in the pension landscape, many are understandably keen to ensure they’re on track to retire comfortably and on their own terms.”

Are state pension age increases likely to be accelerated?

The government launched a review into the state pension age last week, which will assess whether the current state pension age rules are appropriate, based on factors such as the latest life expectancy data.

However, the government doesn’t have to accept the recommendations.

The review will conclude in 2029. The previous independent state pension age review, published in 2023, reaffirmed a recommendation to give at least 10 years’ notice to individuals affected by state pension age changes.

Past reviews have advocated for bringing the increase to 68 forward, but this hasn’t been implemented by previous governments. This latest review could “eventually force the government’s hand”, Rachel Vahey, head of public policy at AJ Bell, said, due to the soaring cost of the state pension.

Spending on the state pension is currently around 5% of GDP (£138 billion) and is estimated to rise to 7.7% of GDP by the early 2070s, according to the Office for Budget Responsibility.

How to prepare for state pension age changes

The review into the state pension age underlines the importance of building a broad retirement plan, such as through workplace pensions and private savings and investments.

The full state pension amount is a far cry from the amount you need for a “comfortable” retirement, and won’t even be enough to cover a “minimum” standard of living in retirement, according to Pensions UK (formerly the Pensions and Lifetime Savings Association, or PLSA).

Vahey, from AJ Bell, urged people planning ahead not to panic, but emphasised how relying solely on the state pension in retirement is risky.

“The state pension, now worth close to £12,000 a year, is extremely valuable. If you’re forced to wait a year or two to claim it, you’ll either need to work longer or find tens of thousands of pounds extra from your pension and private savings to plug the gap,” she said, pointing out working later in life won’t be physically possible for everyone.

“While some people will be able to manage by leaning on other savings, downsizing to free up cash, or moving into another job, possibly part-time, as retirement approaches, the best way to give yourself freedom to retire on your own terms is to build up your private pension pot.

“The best way to boost your pension is to increase contributions, taking maximum advantage of any employer matching and tax relief on offer. Consolidating your private pension pots together will also help you get control of your money, potentially reduce fees to boost returns, and allow you to plan ahead.”
We look at whether the 8% pension saving rule is enough for a comfortable retirement in a separate piece.

The government’s review of the state pension age will explore whether it should automatically increase in line with rising life expectancy, potentially pushing the state pension age up to 70.

Launched in August, the review into the state pension age will assess the "merits" of implementing automatic adjustments to strengthen government finances, as well as looking at how the state pension age can manage “the long-term sustainability of the state pension”.

The government has set up a “call for evidence” as part of it, encouraging individuals and organisations to give their views. If you want to have your say on possible changes to the state pension age, you’ll need to be quick as the deadline to respond is 24 October.

Dr Suzy Morrissey, who is leading the review, notes that the impact of decisions around state pension age are “far-reaching”.

She comments: “Most of us will expect to receive at least some state pension once we reach state pension age.

“I have been asked to make recommendations on a framework that the secretary of state can use when considering future state pension age arrangements, in light of the long-term demographic pressures the country faces.”

The state pension age is currently 66 for men and women. It is due to rise to 67 between 2026 and 2027, and to 68 in 2044 to 2046.

The review will examine the experience of other countries that already automatically link payments to life expectancy, including Denmark, which recently raised its retirement age to 70 – this will kick in by 2040.

Denmark has tied the official retirement age to life expectancy since 2006 and is one of nine OECD countries to do so.

David Pye, a client consulting director at the financial services consultancy Broadstone, calls the review “a critical step in laying out the long-term future of this hugely important core benefit for retirees to aid their individual planning”.

He adds: “With an ageing population, previous governments have almost exclusively used an increasing state pension age to control costs – especially at a time of creaking public finances. If the age is increased or the amount provided is reduced or means-tested, it will reiterate the need for urgent reform in the private savings landscape to ensure adequate incomes at retirement.”

In July, the government revived the Pensions Commission in a bid to tackle the “retirement crisis that risks tomorrow’s pensioners being poorer than today’s”. It warns that too many working-age adults (45%) save nothing at all into a pension.

What is the state pension age review?

This is the third state pension age review. The second one was published in March 2023 by Rishi Sunak’s Conservative government.

By law, the government must review the age at which people can claim the state pension every six years.

The current review launched a call for evidence in August. Anyone who wants to respond must do so by 24 October.

Responses, which should address questions set out in the call for evidence, can be emailed to Independent.StatePensionAgeReport@dwp.gov.uk or sent by post. There are more details on gov.uk.

Morrissey comments: “My report must include the key factors government should consider in determining state pension age for future decades. This includes the merits of linking state pension age to life expectancy, the role of state pension age in managing the long-term sustainability of the state pension, and the international experience of automatic adjustment mechanisms for making decisions about state pension age.”

The report will also look at fairness between generations, as well as the groups of people, regions or nations that may be most impacted by changes to the state pension age.

In addition to Morrissey’s report, the Government Actuary’s Department will prepare a report examining the latest life expectancy data, providing advice on the proportion of adult life in retirement and whether the current legislative timings for the state pension age rising to 68 should change.

The government will consider both of these reports when deciding the state pension age in future; however, it does not have to accept any of the recommendations.

Will the state pension age rise?

Changing the state pension age is an emotive issue. Workers are often dismayed when the age goes up and they have to work for longer before they can claim the state pension.

It’s also a contentious one. The Women Against State Pension Inequality (Waspi) group has been campaigning for years about how a badly-communicated increase in the state pension age impacted many women born in the 1950s, leaving them little time to prepare financially.

The review could agree with the current timetable at which the state pension age will rise to 67 and then 68. Or, it could suggest the increases are accelerated (or possibly slowed down). It may also recommend further age increases, such as to 69 or even 70.

And, as mentioned, it could suggest a new mechanism is put in place, automatically hiking the state pension age whenever life expectancy improves.

In May, Denmark passed a law giving it the highest retirement age in Europe, raising it to 70 by 2040.

The Danish approach caps the amount of time someone can spend claiming state support, legislating that an average of 14.5 years should be spent in retirement. This means the retirement age rises by one year for every year life expectancy increases.

However, experts say bringing in automatic state pension age increases linked to life expectancy could cause “chaos” to people’s retirement plans, while there could be a steep rise in poverty and inequality among older people.

Steve Webb, partner at pension consultants LCP and a former pensions minister, comments: “Having a completely automatic formula to move from changes in life expectancy to changes in state pension age could cause chaos for people’s financial planning.”

Catherine Foot, director of the Standard Life Centre for the Future of Retirement, adds: “Using average life expectancy as the yardstick with which to determine the state pension age inevitably increases inequality and poverty among the pre-retirement population, since it moves the state pension age further away for people who have fallen out of work and are struggling to get back in.”

Regardless of any mechanism to link the state pension age to life expectancy, there will be temptation for the review to suggest some sort of changes to try and reduce the ballooning cost of providing a state pension in this country.

According to the Department for Work and Pensions, forecast expenditure on the state pension in 2025-2026 is £146 billion. Accounting for inflation, this figure has increased by 19% over the past 10 years and 70% over the past 20 years.

Stephen Lowe at retirement specialist Just Group comments: “As a result of rising longevity and dropping birth rates, it is estimated that a quarter of the UK’s population will be aged 65 or older by 2050. This means the burden of funding the state pension will fall on a shrinking proportion of working people.

“If the government wants to avoid increasing taxes or means-testing the state pension then it may have to look at options either to increase the age at which people receive the state pension or to moderate the amount paid.”

The state pension triple lock, which guarantees the state pension is uprated annually by inflation, earnings or 2.5% (whichever is highest), is forecast to cost a massive £15.5 billion a year by 2030, according to the Office for Budget Responsibility.

Lily Megson-Harvey, policy director at My Pension Expert, says the state pension age review must “carefully consider the impact that raising the age further could have on millions of savers and how to help people engage with their pension options”.

She notes: “Not everyone can simply work for longer. It could also disproportionately impact those who are already struggling to save enough and often rely more heavily on the state pension for financial security in retirement.”

The Standard Life Centre for the Future of Retirement echoes this point. Its research shows that a quarter of people in their early sixties now live in poverty, and many more are unable to work due to poor health or caring responsibilities. About 40% of 60-65 year olds have less than £3,000 in savings, and will struggle if they have to wait longer for the state pension, it argues.

Foot comments: “Raising the state pension age may ease pressure on the public finances in the short term, but it risks deepening inequality and hardship for those least able to work for longer. The review must strike a fair balance between sustainability and support, recognising the realities people face and protecting the financial security of those approaching retirement.”

State pension age Brits with one of dozens of common conditions could be eligible for hundreds of pounds a month by claiming a special allowance – and the amount you can get increased in early April 2026.

Attendance Allowance helps with extra costs if you have a disability or health condition severe enough that you need someone to help look after you and you are over state pension age. Around 1.9 million people are claiming the benefit, according to the latest Department for Work and Pensions figures from August 2025.

Attendance Allowance is paid at two different rates. The lower rate is paid if you need frequent help or constant supervision during the day, or supervision at night. You may be eligible for the higher rate if you need help or supervision throughout both day and night, or a medical professional has said you’re nearing the end of life.

Attendance Allowance typically increases every April. In April 2026, the lower rate increased from £73.90 a week to £76.70 a week. The higher rate has risen from £110.40 a week to £114.60 a week.

It means you could get between £3,988.40 and £5,959.20 a year to help with personal support if you have a physical disability, a mental disability, or a health condition and you’re state pension age or older.

The allowance is not means-tested. It doesn’t matter how much state pension you get, how much you have in other pensions, or if you have savings. While it does not cover mobility needs, you do not have to have someone caring for you in order to claim.

Thousands of people are already claiming the allowance for common health issues.

For example, 82,201 state pension age Brits are claiming Attendance Allowance for back pain, according to the latest Department for Work and Pensions data from August 2025.

Another 532,146 are claiming for arthritis – the highest proportion of claims.

A further 21,780 state pensioners are claiming for help with their spondylosis, a general term for age-related wear and tear affecting the spinal disks in your neck.

Dementia accounts for 213,742 of Attendance Allowance claims, and heart disease has triggered another 135,639 Brits to claim Attendance Allowance.

David Samson, benefits expert at anti-poverty charity Turn2Us, said: “Attendance Allowance is not a means-tested benefit, so your income and savings are not taken into account when assessing if you qualify for the benefit.

“Claiming Attendance Allowance also won’t reduce any other income you receive. And if you’re awarded it, you may, depending on your situation, become entitled to other benefits, such as Pension Credit, Housing Benefit or Council Tax Reduction, or an increase in those benefits.”

Am I eligible for Attendance Allowance?

You can get Attendance Allowance if you’ve reached state pension age and your disability or health condition is severe enough for you to need help caring for yourself or someone to supervise you, and you have needed that help for at least six months.

There are different eligibility rules if you’re nearing the end of life, which will mean you get the allowance more quickly and at a higher rate.

You must be in Britain when you claim – unless you’re in the Armed Forces – and have been in Britain for at least two of the last three years.

You are not eligible for Attendance Allowance if you currently get Disability Living Allowance (DLA), Personal Independence Payment (PIP), Adult Disability Payment (ADP) or Scottish Adult Disability Living Allowance (SADLA).

You’ll only need to attend an assessment to check your eligibility if it’s unclear how your disability or health condition affects you.

How to claim Attendance Allowance

You can apply for Attendance Allowance online or by post.

To apply, you’ll need:

• your National Insurance number
• your address and contact details
• details of the disability or health condition that you need extra help for
• details of your GP surgery or medical centre
• details of your care home, hospital or hospice if you’re currently staying in one

You cannot apply online if you are an appointee or have power of attorney for the person trying to claim.

To apply by post, you can print and send the Attendance Allowance claim form or contact the helpline to request a claim form on 0800 731 0122 Monday to Friday, 8am to 6pm.

Then send the completed form to: Freepost, DWP Attendance Allowance

You don’t need to write anything except the freepost address on the envelope, and you don’t need a postcode or a stamp.

After you send your claim, you’ll get a text or letter within three weeks that explains when you can expect a decision. Once a decision is made, you’ll get a letter explaining the outcome.

If you’re awarded Attendance Allowance, the decision letter will tell you when you’ll get your first payment. If you apply online, your claim will start on the date you make your claim. If you print and post the form, your claim will start on the date the Department for Work and Pensions receives it.

Some charities, like Mencap, Age UK, and Turn2Us can help you apply for Attendance Allowance. You can talk through the process with them for free by contacting them directly.

Pension savers may need to factor the cost of sickness into their retirement plans as the UK’s healthy life expectancy plummets to its lowest level since records began in 2011, in a sign you could have to give up work much earlier than state pension age.

Healthy life expectancy has dropped just over 60 years for men and women in England, and to around 59 years in Wales.

Given the state pension age is currently 66 – and begins rising to 67 from this April – these figures show how there could be a significant gap where people are too ill to keep working and too young to get a state pension.

For a 40 year old today the ill health state pension gap could be as much £172,000, adjusted for inflation under the triple lock, according to exclusive analysis by for MoneyWeek by Hargreaves Lansdown. For a 50 year old it could amount to £108,000.

This is up from £150,000 for a 40 year old last year, and up from £93,000 for a 50 year old, with the increases due to the fall in healthy life expectancy widening the ill health pension gap.

By acting early the shortfall could be made up by saving an extra £500 to £700 a month into a private or workplace pension, the analysis showed.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Many people will be reliant on the state pension to top up their retirement income and so if they need to retire early due to ill health it could have a huge impact on their standard of living.

“Trying to fill the gap with their workplace pension can be really challenging and it shows the importance of trying to maximise contributions wherever possible throughout your working life.

“If your employer is willing to pay in more if you do – the so-called employer match – then this can be a great way of boosting how much goes into your pension but you can also make a promise to increase contributions whenever you get a pay increase. Over time even small increases can make a big difference and it can lessen the strain if you do need to retire earlier than you had hoped.”

How long will I live a healthy life?

In 2022 to 2024, the latest government data available, men in the UK could expect to live 60.7 years (77% of life) in ‘good’ general health, compared with 60.9 years (73%) for women.

These were drops of 1.8 years and 2.5 years, respectively, compared with 2019 to 2021.

Despite modest increases in life expectancy since 2019 to 2021, the latest data showed healthy life expectancy at birth in the UK, for both men and women, fell to its lowest level since the Office for National Statistics began recording the data in 2011 to 2013.

Not everyone in the UK gets the same healthy life expectancy. England continued to have the highest healthy life expectancy at birth for both men (60.9 years) and women (61.3 years); Scotland had the lowest for men (59.1 years compared to 59.4 for women) and Wales had the lowest for women (58.5 years compared to 59.2 for men).

In England, for both men and women, the South East remained the region with the highest healthy life expectancy at birth (63 and 64.3 years, respectively), and the North East remained the region with lowest (57 and 56.9 years, respectively). The North East has had the lowest healthy life expectancy at birth in every period since the ONS began collecting records.

How much could my state pension gap be?

Morrissey crunched the numbers on how much extra someone might need to save in order to cover the shortfall between getting too ill to work and beginning receiving the state pension.

In the examples, we take a 40 year old and a 50 year old, both earning £35,000 and contributing at auto enrolment minimums of 8% total (employee and employer contribution). Both have a current pension fund of £80,000.

If they both continued to contribute at this level then the 40 year old would have approximately £197,000 in their pension by the age of 61 (the average maximum healthy life age) . The 50 year old would have around £134,000.

In the case of the 40 year old, they have a state pension age of 68. So if they have to stop work at age 61 due to ill health, as the data suggested they might, this gives them a seven year shortfall.

If the state pension increases by 3% a year – taking account of the fact the triple lock means it rises by at least inflation each year – it would be worth £22,400 by the time they hit age 61 and it would keep increasing.

So they would need to account for approximately £172,000 of state pension payments over those seven years.

If they boosted their workplace pension contribution by about £515 per month (the employer stays the same) then they would have a pension pot worth £370,000 by the time they hit 61 so would cover the state pension shortfall.

The 50 year old has a six year gap, if they had to give up work at the average healthy life expectancy age of 61 as their state pension age is 67.

Morrissey estimated their shortfall would be approximately £108,000. To generate this amount they would need to boost their pension contribution by roughly £680 per month.

The big difference between the shortfalls comes from the rate of growth in the state pension over that time period.

Morrissey said: “The figures show the importance of topping up contributions wherever possible to make sure you can weather the income shock that poor health can bring.”

“Taking the opportunity to increase your pension contributions whenever you can – for instance when you get a pay rise or new job – can be a great way of boosting your pension relatively painlessly and help you make sure early ill health doesn’t derail your retirement plans.”

“You can draw an income from your self-invested personal pension (SIPP), personal or workplace pension from the age of 55 (going up to 57 in 2028) so this could really help bridge the gap during those years.”

With increases in life expectancy and the growing cost of the state pension, speculation is rife that the UK will soon need to raise the state pension age to balance its ballooning books.

Denmark has just passed a law that will soon give it the highest retirement age in Europe, raising it to 70 by 2040.

The Scandinavian nation has tied the official retirement age to life expectancy since 2006 and has revised it every five years. It is currently 67 but will rise to 68 in 2030 and to 69 in 2035.

All people born after 31 December 1970 will have to wait until they are 70 to claim pension benefits in Denmark.

The current UK state pension age is 66. It is due to rise to 67 by 2028 and 68 by 2046, though there have been attempts to bring this forward.

Ian Futcher, financial planner at Quilter, said: “Increasing the state pension age can be a controversial move that will ultimately upset a large cohort of people who will feel the goalposts are being shifted during a time of wealth inequality between generations.

“However, the problem facing governments across developed nations is we have aging populations, and this is adding to the cost of the state pension, at the same time as the tax base is potentially shrinking.”

MoneyWeek looks at how much more the average saver would need if the UK state pension age were to be increased to 70, like in Denmark.

Will the state pension age rise to 70?

While there are no plans to raise the state pension age beyond 68 currently, it is something that will get discussed.

A review carried out in 2023 decided the rise in the state pension age to 68 would not be brought forward – yet. Those born on or after 5 April 1977 will be the first cohort to wait until 68, under current plans.

A 2017 government review suggested expanding this to include those born in the late 1960s. But it was decided instead the pension age would not be changed until a further review was carried out, with a decision expected potentially in 2026.

The pressure is on the government to act to bring down the cost of the state pension. More than half – 55% – of UK social security expenditure goes to pensioners, according to government statistics. In 2025 to 2026, the UK will spend £174.9 billion on benefits for pensioners.

This includes spending on the state pension which is forecast to be £145.6 billion in 2025 to 2026 – inflated by the hugely expensive triple lock that sees the state pension increase by inflation, earnings or 2.5%, whichever is highest, every year.

Denmark’s decision has once again raised the question of how far the UK state pension age could increase – and how much that could cost the average saver.

How much more you would need to save if the state pension age hit 70

The shortfall that a later state pension age – from the current planned 68 to a hypothetical increase to age 70 – creates is around £13,900 per year for the two year gap, according to calculations by wealth manager Quilter.

To make that shortfall you need quite a bigger pension pot.

If you retired at 65 and the state pension kicked in at 68 you would already require a pot of £435,237. This assumes living to 95 on the Pension and Lifetime Savings Association’s (PLSA) moderate standard of living in retirement, which requires £31,300 a year for a single person.

To retire at 65 with the state pension not arriving until age 70 you would require £459,201 by Quilter’s estimates – a pot £23,964 bigger (all growth is assumed at an average 5% per year and inflation at around 3%).

To make up this shortfall if you were 30, you would need to contribute an additional £48 a month into your pension to make up the difference – an extra £576 a year.

At 40, that jumps to £76 a month extra – almost £1,000 more a year. For 50-year-olds, that jumps up again to an additional £140 a month, or £1,680 a year.

Quilter’s Futcher said. “Here in the UK, there will come a point where the state pension is simply too expensive in its current guise and the government will have to choose to either reform the triple lock or up the state pension age.

“What people need to understand is that they cannot rely on the state pension to help them through retirement. It is a good source of income, but it does not provide a quality standard of living on its own, and should it rise beyond 68, this will simply just require personal pensions to do more of the heavy lifting.

“As such, now is as good a time as ever to review your pension arrangements and make changes if possible, in order to boost contributions and ensure you are invested correctly.”

Frozen tax thresholds and above-inflation increases in the state pension have pushed one million pensioners into the higher rate tax thresholds for the first time.

HMRC data obtained by pensions consultancy LCP under the freedom of information act shows that the number of pensioners paying income tax at the higher 40% or 45% additional rate has doubled in just four years and just passed the one million mark.

It come as state pension payments have increased above the rate of inflation due to the controversial triple lock.

But isn’t just the higher rate of income tax that pensioners need to worry about.

The higher earnings could also have an impact on their savings and investments.

How many pensioners are paying the higher rate of income tax?

The full new state pension as of April 2025 is £11,973 and there have been big increases in recent years due to the triple lock calculations.

This has been compounded by frozen tax thresholds, creating fiscal drag.

The current annual state pension payments already takes pensioners close to the personal tax allowance threshold of £12,570 and means pensioners with other income such as annuities or a buy-to-let portfolio are quickly being pushed into higher tax brackets.

The LCP research shows the total number of pensioners paying income tax at all has risen by around 2 million in four years, from 6.7m in 2021/22 to 8.8m in 2025/26 - an increase of almost one third;

However, the total number of pensioners paying at 40% or above has doubled over this period.

The HMRC data shows that in 2021/22 the figure was just under half a million at 494,000 but this year it has gone through the one million mark at 1,028,000.

The proportion of taxpaying pensioners who pay at 40% or more has risen from around 1 in 14 in 2021/22 to around 1 in 9 this year, LCP said.

This could get even higher if state pension payments continue to increase, especially with tax thresholds remaining frozen until 2028.

Steve Webb, partner at LCP, said: “There has been a significant increase in the number of pensioners paying income tax at all rates, but the rise has been greatest in the numbers paying income tax at the higher rates. This has more than doubled from under half a million four years ago to over a million now.”

The impact of being a higher rate pensioner

Moving into a higher rate tax band will mean pensioners pay more tax to HMRC, hitting their retirement income.

But there are other consequences.

Webb highlights that pensioners could end up paying more tax on their savings.

This is because the personal savings allowance (PSA) drops from £1,000 to £500 even if you go £1 into the higher rate threshold.

Webb said: “In the case where someone has £1,000 per year of interest income and is just within the basic rate band, they pay zero income tax on that interest. But if they go £1 above the higher rate threshold they now only have a PSA of £500.

“This means the remaining £500 is subject to tax, and their income tax rate is 40%, so they now have to pay £200 in tax on interest – just for an increase of as little as £1 in their income.”

Being a higher rate taxpayer will also have an impact on pensioners if they are selling assets such as shares to fund their retirement.

The standard rate of capital gains tax (CGT) for individuals is currently 18% on most forms of gains. But this only applies to those who pay income tax at the basic rate. Higher rate income tax payers have to pay 24% CGT on all of their gains, even if they are just £1 over the earnings threshold.

Webb added: “Not only are pensioners paying higher income tax, they are paying more tax on their savings, as their personal savings allowance is cut, and a higher rate of CGT – a ‘triple whammy’. The higher rate threshold has become a real cliff-edge over which growing numbers of pensioners are falling.”

How to reduce your tax bill

You can try to reduce your tax bill by being clever about how you access your income. For example, you could manage how much money you take from your pension through drawdown withdrawals to ensure you don’t go above different earnings thresholds.

This has become more significant ahead of changes to inheritance tax (IHT) rules in 2027 that will include pensions as part of someone’s estate.

Gary Smith, financial planning partner at Evelyn Partners said: “We would always advise clients to consider the income tax they will pay when planning pension withdrawals, but this question is becoming more important now that more savers are looking to take greater amounts out in light of the IHT measures.”

You could also make use of your spouse’s allowances when purchasing assets if they are a lower earner or start building up savings and investments in an ISA which can be protected from the taxman.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “If you’re married or in a civil partnership, you can share assets between you and double the amount of money you can make before the taxman takes a slice. For example, you can share income-producing assets with your spouse, so you can both take advantage of your personal allowance, dividend allowance and ISA allowance.”

Millions of state pensioners will receive a boost to their payments in April 2026, but hundreds of thousands will miss out.

The state pension will increase by 4.8% due to the triple lock, meaning the full new state pension amount will rise from £230.25 per week to £241.30 (£12,547 a year). Meanwhile, the full “old” basic state pension will increase from £176.45 per week to £184.90 per week, taking the full annual amount to £9,614.

The triple lock guarantees that state pensions are boosted each year by the highest of inflation, wage growth, or 2.5%.

However, some pensioners will not get to enjoy the uplift to their income, due to where they live or the type of pension they have.

We explain who misses out on the state pension triple lock.

1. Retirees living abroad in certain countries

British pensioners living abroad in certain countries don’t have their state pension increased under the triple lock.

This “frozen state pension” policy affects about 433,000 pensioners, according to End Frozen Pensions, with 49% of these people receiving £65 per week or less.

The campaign group says the policy is an “injustice” and that those who move abroad to “frozen” countries “should not have to face financial hardship in their retirement”.

Helen Morrissey, head of retirement analysis at investment platform Hargreaves Lansdown, said: “If you retire somewhere that is not in the European Economic Area (EEA), Gibraltar, Switzerland or a country that doesn’t have a social security agreement with the UK then your state pension will be frozen.”

This means British citizens retiring in places like New Zealand, Australia and Canada don’t benefit from a yearly uplift.

“Over time this freeze can have a major impact on your standard of living so it’s important to do your due diligence before you decide to retire overseas,” Morrissey added.

2. Pensioners with additional state pension

The triple lock pledge only applies to the old basic state pension and the new state pension.

This means that if you reached state pension age before April 2016 some of the state pension you receive may not be covered by the triple lock. This is because you may have additional state pension, an extra amount of money paid on top of your basic state pension.

You may receive additional state pension if you’re a man born before 6 April 1951, or a woman born before 6 April 1953. You might also inherit it from your partner.

Jemma Slingo, pensions and investment specialist at investment firm Fidelity International, said: “While [the triple lock] will boost basic payments, the additional state pension – which is an extra top-up based on your National Insurance contributions – will simply rise in line with inflation.”

3. People who defer their state pension

The third group of people who don’t benefit from the triple lock on their whole state pension are those who defer their state pension.

Clare Moffat, pension and tax expert at pension provider Royal London, explained: “If you choose not to take your state pension when you’re entitled to, but delay, the part you defer also only rises by the Consumer Price Index [measure of inflation].”

Your state pension increases by 1% for every nine weeks you delay taking it, equivalent to 5.8% over a year, if you reached or will reach state pension age on or after 6 April 2016.

Deferring can be a good option for people who don’t need the income immediately, perhaps because they are still working or have other sources of cash. The 5.8% uplift for every year you delay could make financial sense depending on how long you live in retirement.

While the state pension alone isn’t enough to live comfortably in retirement, it can form the bedrock of many pensioners’ income.

Not everyone gets a full state pension and you need at least 10 qualifying years on your National Insurance (NI) record to receive anything under the new state pension system.

To get the full new state pension, you usually need 35 qualifying years while for the basic state pension you normally need 30 or more.

If you're not on track to get a full state pension, you can pay for any missing years with voluntary contributions, while others can get free credits if they couldn't work due to illness, unemployment or caring responsibilities. It’s worth checking if you qualify for credits before paying voluntary contributions.

You can even top up your NI record after you’ve reached state pension age and are facing a shortfall.

Because you can only pay for missing NI years for the past six tax years, this means you only have until 5 April to pay for any gaps in the 2019/20 tax year.

However, there are some circumstances where it’s not worth paying to top up.

Adam Cole, retirement specialist at wealth management firm Quilter, said: “In most cases it will make sense to top up your National Insurance contributions in order to boost your state pension. However, not everyone will benefit from making increased payments even if they are eligible.”

Here are six scenarios where topping up is unlikely to be worth the upfront cost.

1. You already have 35 years of contributions

If you already have the full 35 qualifying years on your NI record, there’s no point topping up.

Cole notes: “Those who already have the 35 years of qualifying contributions required for a full new state pension typically have little to gain by making voluntary top-ups. The additional contributions won’t increase their pension entitlement, meaning they risk spending money for no return.”

Those in their 50s may already have the full 35 years of NICs. For example, a woman who started work at age 18, and has worked 35 years paying NICs, would now be aged 53.

You can check your state pension forecast on gov.uk to see if you already qualify for the full state pension.

2. You are young and working

If you’re nowhere near reaching your state pension age, which is currently 66 and rising to 67 by 2028 and 68 by 2046, it probably doesn’t make sense to buy extra years just yet.

You can check what you’re forecast to receive on the government’s state pension forecast service, and what year you’ll receive it.

If it says £230.25 a week, this is the current amount awarded under the full state pension, meaning it’s expected you’ll have 35 years of NICs, even if you don’t have them yet.

The forecast also states what you’d get if you retired tomorrow with your current NIC record and how many more years you’d need to contribute to get the full £230.25.

Cole says: “If you are young and have many years working ahead of you then it is important not to make the decision [to top up] too early and achieve your qualifying status through the workplace.”

3. You’re eligible for Pension Credit

If you’re on a low income and eligible for Pension Credit, it probably won’t make sense to top up your state pension.

Cole says: “If you are likely to receive Pension Credit or other income related benefits, then any top up to your state pension will impact your ability to claim these in future.

“Pension Credit in particular isn’t just an income source either – it gives you access to a free TV licence (if you are over 75), as well as help with NHS costs. Pushing yourself out of this benefit could be costly.”

4. You’re in poor health

As well as your age, you also need to consider your health. Buying NI credits may not make sense if you’re unlikely to live to state pension age, or much past it.

According to Steve Webb, partner at the pensions consultancy LCP and a former pensions minister, those who fill in gaps usually make their money back within four years.

So depending on your life expectancy, it may not be worth topping up.

Cole says: “If you are in poor health then you may not benefit from the top up should you pass away during the early stages of your retirement.”

5. You look after children

It may be possible to get NI credits and boost your state pension without paying for them.

Helen Morrissey, head of retirement at investment platform Hargreaves Lansdown, explains: “Before you hand over any money to top up your state pension, you first need to check whether any of those gaps can be filled by a benefit that comes with an automatic NI credit.

“For instance, you may have been at home caring for a child but not claiming Child Benefit. In such cases, it is possible to backdate a claim and get those credits topped up for free.”

Credits are available to those who are not paying National Insurance because they are unemployed, caring for family or on parental leave.

This includes grandparents looking after grandchildren. These Specified Adult Childcare Credits let a parent receiving Child Benefit transfer the National Insurance (NI) credit to an eligible family member such as a grandparent.

6. You would pay more tax

Another situation where you might want to think twice about topping up your state pension is if it pushes you into a higher tax bracket.

“You may find that boosting your state pension tips you over a tax threshold so you will need to consider carefully whether the top-up is worth your while,” comments Morrissey.

If, for example, you paid £923 to fill in the full 2024-25 tax year, this would boost your state pension by £6.58 a week. Over a year, that’s an extra £342.16. But if that cash was liable for 40% tax – because you had other retirement income such as from workplace pensions – you’d only have £205.30 left.

You’d then need to live for four and a half years past state pension age to get your £923 back.

7. The years you want to top up are too expensive

The cost of topping up missing NI years varies depending on which year you’re paying for.

For example, the cost to fill a missing year for 2025/26 is £923 a year, but to fill a missing year for 2019/20 it is £780.

Cole explains: “You need to ensure the year you are looking to add will make sense from a financial perspective.”

What to do if you’re not sure about topping up your state pension

If you’re not sure whether to top up your state pension the first thing to do is use HMRC’s state pension forecast tool to see how much you are due based on your age and if there are any NI gaps you can fill.

You can also check your National Insurance record through your Personal Tax Account, or on the HMRC app, where you can take a survey to assess your suitability to pay online.

You can also contact the Future Pension Centre (if you are below state pension age) on 0800 7310 175 who will be able to give you guidance and tell you if paying extra will increase your state pension entitlement.

Chancellor Rachel Reeves will deliver her Spring Statement on 26 March and there are plenty of rumours about what could be announced.

These include reducing the cash ISA allowance, cutting government spending and increasing taxes. However, it is now understood there won’t be any change to the cash ISA limit next week, although a shake-up to the ISA rules could still be announced at a later date.

The Spring Statement will follow a Spring Forecast from the Office for Budget Responsibility (OBR), the UK’s fiscal watchdog.

While the government says it is “committed to one major fiscal event a year” – presumably the Autumn Budget rather than the Spring Statement – speculation is mounting that we could still see some tax and spending changes in next week’s statement.

“Is it a Spring Forecast? A Spring Statement? Dare we even say it – a mini-Budget?” comments Tom Selby, director of public policy at AJ Bell.

“Whatever label the chancellor puts on her set piece announcement on 26 March, the economic picture the OBR paints is expected to be grim, with fears of stagnation looming and the spectre of rising defence costs as Donald Trump’s US government retreats from Europe further threatening to strain the public purse.”

He adds: “Against such a challenging backdrop, there is a growing expectation that tough fiscal measures are in the offing, despite the chancellor’s insistence there would be no return to austerity.”

If Reeves is wondering how to balance the books, it’s possible we could see some changes to pensions. The government has already targeted pensioners and pension savers since getting into power last year, such as by means-testing the Winter Fuel Payment, and hitting pension pots with inheritance tax.

We look at potential pension announcements in the upcoming Spring Statement.

State pension

We already know the state pension will rise by 4.1% next month. But, the huge bill of paying the state pension, along with the commitment to the triple lock, could be a target for a government keen to slash costs.

Steven Cameron, pensions director at Aegon, warns: “If the OBR’s report and other budgetary pressures are worse than anticipated, we can’t rule out a ‘rabbit in the hat’ review of the state pension. There’s already an ongoing review of the state pension age and government finances may mean it needs to increase further or faster.”

He adds that the state pension triple lock could also come under scrutiny, as it’s proven costly and unpredictable in recent years. “While the government has currently committed to keeping it, the formula might be adapted. Instead of annual increases being the highest of earnings growth, inflation, or 2.5%, a smoothing mechanism could be introduced.”

According to Cameron, pensioners might receive an inflation increase as a minimum, and if, over the previous three years, wage growth has on average been higher than inflation, they could receive an additional uplift. “This would protect pensioner purchasing power and make future costs less unpredictable,” he adds.

Pensions and inheritance tax

Reeves announced in last year’s Autumn Budget that pension pots would become subject to inheritance tax (IHT) from April 2027.

This was something of a surprise, and many pension experts responded by saying the policy would penalise prudent savers and their loved ones, while adding complexity.

A government consultation into how the rule change would work has now ended, and it’s possible Reeves might use the Spring Statement to give an update.

Steve Webb, partner at pension consultants LCP, and a former pensions minister, tells MoneyWeek: “At a stretch, we might get an update on plans to apply IHT to pensions, perhaps saying that HMRC are going to do a further consultation because although the policy hasn’t changed they want to make it less onerous on individuals (and pension schemes).”

Selby adds: “Given there were reportedly hundreds of responses to the consultation, the Spring Statement may come too soon for the chancellor to give detailed feedback. She could, however, use the opportunity to give an indication of whether she is willing to consider doing things differently, or if the Treasury is committed to its IHT plans.”

Tax allowances

There is speculation that Reeves might extend the Tories' freeze on tax thresholds beyond 2028. This would drag more people into paying tax, and higher rates of tax.

“The freeze on allowances is due to end in 2028 but in light of the fiscal straitjacket Reeves finds herself in, extending this to 2030 could raise some much-needed cash for the Exchequer,” comments Selby.

Frozen tax allowances mean that as people’s wages rise, they are dragged into higher tax brackets. The combination of a static tax-free personal allowance and rising state pension thanks to the triple lock also means that many pensioners will soon have to start paying tax on their state pension.

Selby notes: “The Treasury may be comfortable giving with one hand through state pension increases while taking with the other via income tax, but it also leaves the door open for the Conservatives to accuse the government of hitting pensioners with a ‘retirement tax’.”

Workplace pensions

According to Webb, it’s possible there could be an update on government plans to create defined contribution pension “mega funds”, as trailed in the Autumn 2024 Mansion House speech, by forcing consolidation of smaller schemes.

We may also hear about reforms aimed at encouraging pension schemes to invest more in the UK economy.

Selby comments: “The second stage of the Pensions Review, focused on adequacy, has yet to materialise and Reeves could provide an update on the government’s thinking in the Spring Statement.

“There are significant challenges to overcome here, principally how and when to scale up minimum automatic enrolment contributions from 8% of ‘qualifying earnings’. Having already significantly hiked costs on employers in her October Budget and with the government focused on delivering improved economic growth numbers, there is every chance this particular reform will find its way into the political long grass.”

Pensions tax relief

With an uncertain economic backdrop, and a government that likes to surprise us (see: IHT on pensions; Winter Fuel Allowance; refusing to pay Waspi compensation, to name just three), could the Spring Statement spring a pension shock on all of us?

Tomm Adams, partner at tax firm Blick Rothenberg, tells MoneyWeek: “We’ve already had one nasty pensions surprise in the first year of the Labour government, with the announcement that pensions will be brought into the scope of inheritance tax. Very few predicted this; instead, we were all speculating over some kind of cuts to income tax relief either on pension contributions or on benefits taken in retirement. For example, reducing the tax-free lump sum from 25% of the pot to say 20% or even 5%.”

He adds: “I don’t imagine the chancellor will backtrack on this inheritance tax raid in her Spring Statement, but could she cut income tax relief after all? To do so would be disastrous for millions of ordinary people looking to do the right thing by saving long term. Short-term Treasury gains would come at the cost of a serious, long-lasting impact on savers’ confidence in the UK pensions system and a real impact on the lives of future pensioners.”

Widows and widowers could be entitled to boost their state pension by thousands of pounds each year through inherited state pension benefits. The rules could apply to you if your late spouse reached (or would have reached) state pension age before 6 April 2016.

Last tax year, more than half a million surviving spouses boosted their state pension by over £5,000 under these rules, according to new figures obtained by Royal London through a Freedom of Information (FOI) request.

The current maximum you can inherit in the 2024/25 tax year is £11,365 per year, or £218.39 per week. This means some widows and widowers are receiving an enhanced state pension of up to £22,858 per year in total, according to Royal London, once their own entitlement is taken into account too.

With inflation on the rise again, boosting your state pension is more important now than ever. The cost of retirement has already soared in recent years, creating particular challenges for single pensioners who are unable to split the cost of housing, bills and food with a partner.

The latest figures from the Pension and Lifetime Savings Association (PLSA) show a single pensioner now needs a minimum of £14,400 per year for a basic retirement. This rises to £31,300 for a moderate retirement, and £43,100 for a comfortable retirement. This doesn’t include housing costs, so you will need more than this if you are still renting or paying off a mortgage in retirement.

When it comes to inheriting your partner’s state pension benefits, the rules are complex and widely-misunderstood. As such, it is important that surviving spouses check their entitlement to avoid missing out.

How does the old state pension work?

Before delving into the rules on inherited state pension benefits, it is important to understand how the old state pension is structured. You fall under the old system if you are a man born before 6 April 1951, or a woman born before 6 April 1953.

The old state pension consists of various components. The main component is the basic state pension, which comes to £169.50 per week if you have a full National Insurance record.

On top of this, some people are entitled to an extra component known as the additional state pension. There is no fixed amount for the additional state pension. How much you receive depends on:

• The length of time you paid National Insurance contributions
• Your earnings
• Whether you contracted out of the scheme
• Whether you topped up your basic state pension (this was only possible between 12 October 2015 and 5 April 2017)

The additional state pension is paid into your bank account alongside your basic state pension.

Can you inherit your spouse’s basic state pension?

If you and your spouse both fall under the old system and your partner dies first, you could be entitled to receive more money each month in basic state pension. This will depend on your spouse’s National Insurance record, though. Furthermore, you will only receive the extra money if you haven’t already built up a full National Insurance record yourself.

There are some important caveats to bear in mind, though. If you are under the state pension age when your spouse dies, and you remarry before you reach state pension age, you will lose this right.

Can you inherit their additional state pension?

If you outlive your spouse, you could also be eligible to inherit some of their additional state pension, up to a current maximum of £11,356 (2024/25 tax year). This is in addition to any state pension you are entitled to in your own right.

The additional state pension is made up of three schemes:

As a result of these inheritance rules, Royal London says some pensioners are currently receiving an enhanced state pension of up to £22,858 per year. This is enough to fund a basic retirement (£14,400 per year based on the PLSA figures) with almost £8,500 left over for further spending.

How many people are inheriting the additional state pension?

Royal London’s FOI request revealed that over two million pensioners received inherited state pension benefits through the state earnings-related pension scheme (SERPS) in 2023/24. Fifty percent of the group received £3,000 or more.

^{Source: DWP data requested by Royal London via a freedom-of-information request, 2024.}

“This data shows how much of a difference inheriting a SERPS pension from your husband, wife or civil partner can make,” said Sarah Pennells, Royal London’s consumer finance specialist.

“The worry is that, while more than two million people are claiming inherited SERPS, others could be missing out. Understanding the rules is key to boosting your retirement income,” she added.

Indeed, former pensions minister Sir Steve Webb has previously highlighted cases where pensioners have potentially missed out after being given incorrect information by DWP staff over the phone. For example, one misconception is that you cannot inherit the benefit if your partner died before reaching state pension age. This is incorrect.

Some people also believe that they cannot inherit their partner’s additional state pension (part of the old state pension) because they themself are on the new state pension. Again, this is not true.

It comes after the DWP previously admitted to errors which led to state pension underpayments for a number of groups, including widows. The DWP has been undergoing a correction exercise for three groups (married people, widowed people and the over-80s) since 2021. It has now reviewed over 850,000 cases overall, (including more than 445,000 for widows).

“Our priority is ensuring pensioners receive the dignity and security they deserve in retirement and that state pension underpayment rates remain as low as possible,” the DWP said. “We have now completed the vast majority of cases in the exercise as planned with a small number of outstanding cases due to further documentation needed from the customer.”

If you are in any doubt about your entitlement, you should contact the pension service.

Retirees may have to pay tax on their state pension as early as next year, according to new forecasts.

The full state pension could soar by 5.5% to reach £12,631 a year in April 2026, due to the triple lock.

If this happens, it would breach the £12,570 tax-free personal allowance, and the excess would be taxed at the pensioner’s highest income tax rate.

The triple lock dictates that the payment is increased each year by annual earnings, inflation or 2.5%, whichever is higher. The full new state pension is currently worth £11,502 a year, and will rise by 4.1% to £11,973 this April.

It was previously thought that the state pension wouldn’t be subject to tax until April 2027, according to Office for Budget Responsibility (OBR) forecasts released alongside the Autumn Budget.

But, analysis by Deutsche Bank suggests that strong wage growth will push the state pension up faster than expected.

Figures released this week revealed that wage growth in the UK hit 5.9% in the three months to December 2024. However, the state pension triple lock uses annual earnings in the three months to July, and it’s this figure that Deutsche Bank predicts could come in at 5.5%.

Sanjay Raja, Deutsche Bank’s chief UK economist, comments: “As of right now, our projection for average weekly earnings total pay in the three months to July sits at 5.5% year-on-year. Our September 2025 CPI inflation projection sits just around 4.25%.

“Therefore, based on our current projections we see state pensions rising by 5.5% in April 2026.”

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the online investment platform, tells MoneyWeek: “Paying tax on state pension income will feel very unfair, particularly for those who solely rely on the benefit to make ends meet. Making tax demands on retirees with no other sources of income will be extremely worrying for pensioners who are already struggling with higher living costs.”

She adds: “Meanwhile, those receiving a private pension income will simply see even more of that money swallowed up by tax as a result of frozen income tax thresholds.”

Ros Altmann, a former pensions minister, warns that making the state pension liable for tax could be an “administrative nightmare”.

She comments: “Many pensioners have never paid tax in their life. Those with private pensions or the younger ones who receive the new state pension and are not on the old [state pension] system may get a simple assessment form to help them know what tax and how to pay it.

“But the older ones would have to fill in a tax return. Can you imagine 90-year-olds being told they owe a few pounds in tax and must fill in a tax return, or face fines and penalties?”

Why will retirees have to pay tax on their state pension?

Millions of retirees already pay income tax because they receive extra money on top of their state pension, such as from a buy-to-let, part-time work or a personal or workplace pension.

But those receiving the full state pension and no other income in retirement – who would be regarded as some of the poorest pensioners – will also be dragged into the tax net if the payout rises above the personal allowance.

The £12,570 personal allowance is frozen at its current level until 2028, meaning each annual uprating to the state pension could increase the tax liability.

If the full state pension rose to £12,631 a year next April, as predicted by Deutsche Bank, the £61 above the personal allowance would be taxed. For a basic-rate taxpayer, this would create a £12 tax bill. For a higher-rate taxpayer, the bill would be £24.

The OBR previously forecast a 2.6% rise in the state pension for next April. It then said the state pension would increase to £13,230 a year by 2029.

If the freeze on the personal allowance was extended beyond 2028, and the 2029 OBR prediction was correct, it would mean the state payout would be £660 above the allowance in four years’ time. This would trigger a £132 tax bill for basic-rate taxpayers, while higher-rate taxpayers would need to pay £264.

Is the retirement tax unfair?

Former prime minister Rishi Sunak coined the term “retirement tax” on the election campaign trail last year after he claimed that a Labour government would subject the state pension to a "retirement tax”.

Sunak froze income tax thresholds until 2026 in the 2021 Spring Budget when he was chancellor. The freeze was later extended to 2028 by former chancellor Jeremy Hunt.

The Conservatives said it would introduce “triple lock plus” to avoid the state pension being liable for income tax. This was to be a new personal allowance for retirees, which would rise in line with the triple lock – therefore keeping pace with the state pension and reducing the risk of them being taxed.

However, Labour did not commit to such a policy, and now in government, it has not unveiled any measures to protect pensioners from tax as the state pension rises.

Clare Moffat, pensions and tax expert at Royal London, notes: “The previous government had set out proposals to avoid any income tax being paid on the state pension, but it is unclear whether those will be revisited. It would make little sense to have a situation where the state is paying you an increased pension on one hand but taking some of it back in tax on the other.”

According to Royal London, the most recent data from HMRC shows there’s been an increase of two million over-65s paying tax since 2020/21, and “that would rise substantially if the state pension increased to over £12,570”.

Haine says if the state pension rose above the personal allowance it “could put pressure on the government to unfreeze the personal allowance to prevent retirees being taxed on this vital benefit or reconsider whether more radical action is needed”.

A Treasury spokesperson said: “The state pension is the foundation for ensuring pensioners are able to live with the dignity and respect they deserve.

“We are committed to the triple lock, and pensioners whose sole income is the new state pension and who have not deferred or receive protected payments do not pay any income tax.”

Retirees will have to start paying income tax on their state pension in less than three years, according to official forecasts.

The full new state pension will reach £12,592 a year (£242 a week) in April 2027, meaning it will breach the £12,570 tax-free personal allowance.

The state pension will then increase to £13,230 a year by 2029.

This is according to forecasts from the Office for Budget Responsibility (OBR), which were published alongside the Autumn Budget last month.

The OBR predicts that after an 8.5% hike in the state pension in April this year, and a 4.1% rise next April, the state pension will rise more slowly, at 2.6% in April 2026 (in line with inflation), and then 2.5% for the next few years.

This is in line with the state pension triple lock, which guarantees that the payout will increase every April by 2.5%, wage growth or inflation, whichever is highest.

But even with this slow growth, pensioners face paying a “retirement tax” on their state pension income in just a few years’ time.

Ian Cook, chartered financial planner at Quilter Cheviot, warns that retirees will be in the “perverse situation” where they have to start “paying back their state pension to HMRC due to frozen allowances”.

The personal allowance is frozen at its current level until 2028, as announced in the Budget.

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, a wealth manager, called the situation “worrying” and “unfair”, adding: “This will put pressure on the government to unfreeze the personal allowance to prevent retirees being taxed on this vital benefit.”

Why will pensioners have to pay a retirement tax?

The term “retirement tax” was coined on the election campaign trail earlier this year when former prime minister Rishi Sunak claimed that a Labour government would subject the state pension to a "retirement tax”.

The Tories previously announced “triple lock plus” to avoid the state pension being liable for income tax. This was to be a new personal allowance for pensioners, which would rise in line with the triple lock - therefore keeping pace with the state pension and reducing the risk of pensioners being taxed.

However, Labour did not commit to such a policy. The government has also chosen to keep the personal allowance in the deep freeze, which former chancellor Jeremy Hunt had previously announced.

Millions of pensioners already pay tax on their state pension due to the complicated nature of the payout. According to analysis by the consultancy, LCP, 2.5 million - or one in five pensioners - receive a state pension higher than the personal allowance and are therefore losing part of it to income tax.

Many pensioners also pay income tax because they receive extra money on top of their state pension, such as from part-time work or a private pension.

But, younger pensioners who only receive the new state pension, and are eligible for the full amount, also face paying a retirement tax due to future rises in the payout.

Haine notes: “Landing retirees with no other sources of income with tax demands will be unfair and extremely worrying for pensioners who are already struggling to get by after the cost-of-living crisis.”

Cook adds that if the state pension breaches the personal allowance, “any private pension provision other than the tax-free cash lump sum would become taxable at their highest marginal rate, resulting in large tax bills for many pensioners depending on how much they were drawing from their pensions”.

How much will the state pension rise by?

The new state pension is currently worth £221.20 a week (£11,502.40 a year). It will increase by 4.1% in April next year, meaning a jump of £472 and a new annual total of £11,974.

In April 2026, it is forecast to rise by 2.6%, giving retirees on the full new state pension an annual income of £12,285.

A further jump of 2.5% in 2027 means the state pension will rise to £12,592 - breaching the personal allowance.

Another 2.5% rise will see the payment increase to £12,907 in 2028, and then to £13,230 by 2029.

This adds up to a 15% rise in the state pension between now and 2029.

Haine comments: “The OBR expects pay growth to slow dramatically over the next few years and inflation is expected to remain closer to the Bank of England’s target of 2% apart from 2026 where it is expected to come in at 2.6%.

“This means the state pension should rise by 2.6% in April 2026 and then by the minimum guarantee of 2.5% for the three years after that.”

If you’re not sure how much state pension you’ll receive in retirement, you can use the government’s online checker.

Rachel Reeves has used her first Budget speech to confirm that more than 12 million pensioners will receive a 4.1% uplift to their state pension in April.

This is due to the state pension triple lock, which the government says will be maintained for the duration of this parliament.

The 4.1% boost applies to the basic and new state pension. Someone receiving the full new state pension will gain an extra £470 a year from April, giving a total of £11,973.

Mike Ambery, retirement savings director at Standard Life, comments: “Pensioners across the country will be relieved to see no state pension shocks in the Budget as the chancellor confirms that the state pension will rise by 4.1% to match the average earnings element of the triple lock.”

The triple lock guarantees that the state pension will rise each April by whichever number is highest out of inflation, average earnings growth, or 2.5%.

There was no mention of the Winter Fuel Payment in the Labour Budget. Critics of the decision to means-test the benefit had been hoping for a U-turn. It means the increase in the state pension will be offset by the removal of the Winter Fuel Payment for millions of pensioners, worth up to £300 this winter.

Reeves also announced that Pension Credit would rise next April, and that she will end the freeze on income tax bands in 2028 - which should help lift pensioners out of paying income tax.

We have all the details about what was announced, and what it means for your retirement finances.

What’s happening to the state pension?

As widely expected, the state pension will rise by 4.1% next year. The full new state pension will go up from £221.20 to £230.25 a week, providing an additional £470 a year. The full basic state pension will increase from £169.50 to £176.45 per week, worth an extra £360 annually.

It’s a smaller hike than the one seen in April this year, when the state pension jumped by 8.5%.

However, it is higher than the increase to working-age benefits like Universal Credit. Working-age benefits - and also the additional state pension - will rise by 1.7% in April 2025, in line with inflation.

What about Pension Credit?

The Pension Credit standard minimum guarantee will increase by 4.1% from April 2025. This means an annual increase of £465 in 2025-26 in the single pensioner guarantee and £710 in the couple guarantee.

The Treasury also announced that the administration of Pension Credit and Housing Benefit will be brought together for new claimants from 2026. “This is two years earlier than previously planned, and will support more people to receive the benefits that they are entitled to,” it said.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, says it’s vital to claim Pension Credit if you’re entitled to it, as it will unlock access to the Winter Fuel Payment plus other benefits.

She comments: “It is an important, but hugely underclaimed benefit that acts as a gateway to other help such as support with council tax and a free TV licence for the over 75s. However, recent government data shows only about two-thirds of people who could benefit from Pension Credit are claiming it so the government has an uphill struggle on its hands to boost awareness.”

Will retirees have to pay a pension tax?

Due to the increases to the state pension and a freeze on the income tax threshold, some pensioners are slowly being dragged into paying tax on their retirement income.

Former prime minister Rishi Sunak previously warned that Labour would introduce a retirement tax as the full state pension (currently £11,502 a year) will soon be higher than the tax-free personal allowance (£12,570). However, Reeves announced today that the income tax bands will start to be uprated in line with inflation from April 2028.

Ambery notes: “One of the biggest tax-raising measures of recent years hasn’t resulted from a tax hike but instead the decision to freeze income tax bands at 2021/22 levels. The bands had been frozen until the end of 2027/28 tax year and it is has been confirmed that they will now rise with inflation beyond this.

“As the personal allowance will now rise beyond £12,570, many lower income pensioners will be relieved to see their state pension income less likely to fall into scope. From next April, the state pension alone will be 95% of the personal allowance, leaving pensioners with only £594.40 of headroom before they begin paying income tax.”

HMRC has apologised after tens of thousands of people wanting to top up their state pension on 5 April, the last day of a special window to fill National Insurance (NI) gaps between 2006 and 2018, were wrongly told that the deadline had passed.

Saturday, 5 April had been the last chance for customers to buy NI credits dating back to 2006 and boost their state pension. Usually it’s only possible to buy National Insurance credits for the past six tax years.

There had been a huge amount of publicity about the special window and the deadline, and long wait times to get through to the Department for Work and Pensions (DWP) on the phone to discuss buying the NI credits.

However, in an embarrassing blunder, HMRC took the online service down a day early by mistake, affecting thousands of people who wanted to make payments between 2006 and 2021.

A spokesperson said: “We’re sorry that customers were unable to use our online service on Saturday to top up National Insurance contributions for years prior to 2021. We will contact anyone affected directly about the payments they wanted to make to ensure they don’t miss out.”

About 21,000 customers who logged onto the webpage on 5 April and had payable gaps between 2006-07 and 2020-21 will be contacted.

What happened to the online state pension top-up service?

MoneyWeek understands that the online state pension service to make payments between tax years 2006-07 and 2020-21 was unintentionally taken offline a day earlier than planned.

HMRC is able to identify those who visited the website on 5 April 2025, and is currently assessing the most effective way to contact them.

Customers were still able to make payments for years as far back as 2021 and the DWP’s separate call back service was working as normal.

The online call back request service was launched by the DWP at the end of February after its phone lines were overwhelmed by people wanting to check their NI record and potentially buy credits to boost their pension.

The 5 April deadline created a “high number of calls” to the DWP’s helpline, which resulted in “long wait times”, according to the Future Pension Centre.

Under the new rules announced in February, people could still buy credits going back to 2006 as long as they logged a call back request by 5 April.

If you’ve logged a call back request, the DWP will phone you at a later date to discuss payment of the voluntary NI contributions. This will normally be within eight weeks of submitting a request.

The DWP will prioritise customers who have already reached state pension age, then those within 12 months of reaching state pension age. Remaining cases will be dealt with according to the date they submitted a call back request.

A DWP spokesperson said: “We introduced an online service for individuals to register their interest and request a call back to ensure that everyone had the opportunity to boost their state pension.

“We have doubled the number of staff to process call back requests alongside sending SMS messages to alert individuals the day before we are due to call them to boost numbers answering the phone and processing rates.”

HMRC will get in touch with those people who saw an incorrect message that the deadline had passed.

MoneyWeek understands there is no need to contact DWP or HMRC.

How many people managed to top up their state pension?

The taxman told MoneyWeek last week that more than 120,000 people had so far topped up more than 260,000 years, worth £153 million.

The average online top-up payment was £1,893, HMRC said. The largest weekly state pension increase by purchasing extra NI credits was £119.31.

While under normal rules you can usually only fill gaps in NI contributions for the past six years, under a special concession, the government let people also claim back to between April 2006 and April 2018. It meant you could boost your state pension by thousands of pounds.

The allowance was meant to end in April 2023 but the DWP struggled to cope with demand and its phone lines became jammed so the deadline was extended to July 2023, and then again to 5 April 2025.

It means that since 6 April 2025 – unless you logged a call back request beforehand, or tried to top up on 5 April but were wrongly told the deadline had passed – you will only be able to make voluntary NI contributions for the previous six tax years.

Steve Webb, partner at pension consultants LCP and a former pensions minister, said that for many people a state pension top-up will be “excellent value”, but for some people topping up would be of little or no value.

Should you buy extra National Insurance credits for your state pension?

You need a minimum of 35 years of NI contributions to get the full new state pension payment, and at least 10 years to qualify for any state pension.

Having 35 years can be tricky to achieve if you have taken time off to care for children or elderly relatives or if you have taken a career break.

Purchasing NI credits can "buy extra years", boosting the amount of state pension you get.

After the 5 April 2025 deadline, you will only be allowed to claim back for six years of NI credits.

Those wishing to pay for previous years are currently charged £15.85 per week or £824.20 to fill a full historic gap year. However, a few of the tax years have a different cost. If you're topping up the 2023/24 tax year, it’s £907.40, while the 2020/21 and 2021/22 tax years are about £25 cheaper.

Buying one year will typically add 1/35 of the full state pension rate or just over £300 per year.

“For individuals with multiple gaps in their NI records, the potential long-term benefits are significant,” says Kirsty Anderson, retirement specialist at Quilter.

“Even topping up a single year would be recouped within a few years of retirement.”

Ross Lacey, director at Fairview Financial Management, adds: "In our experience, it's worth everyone looking at their projected state pension and if it seems unlikely that they'll have the maximum available, to do some analysis and enquire about topping up or paying for part years.

"Generally, it takes around three years of receiving your state pension to 'pay back' the amount it cost to buy the extra years."

Topping up your state pension is not going to work for everyone. Reasons not to top up may include being young and in work, being in poor health, or you're eligible for Pension Credit.

Alice Haine, personal finance analyst at the investment service Bestinvest, says plugging gaps can be quite an expensive process, so it is important to assess whether you actually need to buy back any missing years.

“This will depend on how many more years you plan to work and whether you are eligible for NI tax credits which fill the gaps, such as those who have been sick, were unemployed or took time out to raise a family or care for elderly relations,” she says.

For example, specified adult childcare credits can be claimed for free if you are caring for a family member, and their parents are earning their own credits. This often applies to grandparents who have retired but are under the state pension age and need a state pension top-up.

Can expats top up a UK state pension?

UK expats living overseas and foreign residents who worked in Britain for at least three years can also buy NI credits and top up their state pension.

James Green, director of deVere Europe, a financial adviser firm, says that while the UK state pension may have fallen off the radar for expats who have spent years working abroad, buying extra credits “could make a substantial difference to pension outcomes”.

He comments: “For many UK nationals overseas, the state pension has become a forgotten asset. But it shouldn't be. It offers long-term, reliable income — and is often inflation-linked — and can make a real difference to financial freedom in retirement.”

Meanwhile, foreign residents who worked in Britain for three years or more can top up their National Insurance record. For example, if they only worked in the country for five years, they could buy another five years of credits to ensure they receive a UK state pension.

Ten qualifying years of NI payments would entitle them to an annual state pension of about £3,286 for life, which may rise each year depending on the country they retire in.

Foreign residents could buy more credits so they have 35 years, to give them the full new state pension.

How to top up your state pension

Before April 2023, the only way to purchase extra NI credits was by calling the Future Pension Centre at the DWP to find out about filling gaps and then phone HMRC to get a "code" to make sure their payment is correctly allocated.

Much of this can now be done online though.

You can use HMRC’s state pension forecast tool to see how much you are due based on your age and if there are any NI gaps you can fill.

You can also check your National Insurance record through your Personal Tax Account, or on the HMRC app, where you can take a survey to assess your suitability to pay online.

Haine adds: “Calculating whether to top up can be confusing though and ultimately there is no point paying for more years than you need because you won’t get that money back.

"This is why, for some people, calling the government’s Future Pension Service to double check how many years they can buy and whether voluntary contributions really will add to their state pension may be key."

How much is the state pension worth?

The full new state pension is worth £230.25 a week (£11,973 a year), following a 4.1% rise this month, thanks to the triple lock. It was previously worth £221.20 a week (£11,502 a year).

The new state pension is paid to men who were born after 1951 and women born after 1953 who have at least 35 years of NI contributions.

The full basic state pension is £176.45 per week, or £9,175 a year.

Married women who retired before March 2008 were able to claim for an enhanced state pension once their husbands retired - but inadequate procedures and systems in place by the Department for Work and Pensions means tens of thousands of women were underpaid their state pension. 

But, justice could be on the horizon after the Parliamentary Ombudsman’s office said this week it would fully investigate seven cases following a campaign run by the former pensions minister, Steve Webb.

Webb, who is now a partner at consulting firm LCP and was appointed as the Liberal Democrats pensions minister in 2010, described DWP systems prior to 2008 as ‘bizarre’ and ‘old-fashioned’. He has been seeking justice for the state pension underpayments for married women who already received smaller pension payments after taking time out of work to raise a family, for example.

Prior to 2008, the DWP only gave the uplift to these women if they filled in another state pension form - the payment was not automatic. But, women would only get this claim form if their husbands had ticked the box to say ‘we will send you a form for your wife to fill in.’ 

For those who found out years later were told they could only get backdated payments of 12 months.

“I’ve been supporting a group of women on this issue for over three years, and the big breakthrough this week is that the ombudsman has written to the three lead cases I submitted to say that a full investigation is to be launched,” Webb said.

“Basically this means that the ombudsman thinks there’s something worth a serious look here.”

Here’s who was affected and what compensation could look like.

Who was affected by state pension underpayments ?

While there are several ongoing cases related to state pension underpayments, such as those relating to mothers and inaccuracies in National Insurance records, this case related to married women pensioners who hit state pension age before the rules changed.

“Prior to a rule change in March 2008, married women could claim a state pension at age 60 but were initially awarded a pension based purely on their own record of NI contributions. If they had spent time at home raising a family or had other interruptions to their work history, this pension could often be very low, potentially as low as 25% of the full basic pension.  

“However, when their husband drew *his* state pension, married women could get an uplift to a 60% pension based on their husband’s contribution. Crucially, this uplift only happened if they made a further state pension application once their husband retired.”

These women will have missed out on tens of thousands of pounds and did not expect to apply again to get an uplift. For those who didn't make the claim, they remain on the lower rate. Many have lost out on more than a decade’s worth of state pension payments.

“If compensation is recommended for all women affected, we could be talking about hundreds of millions of pounds,” Webb added.

UK pensioners living abroad miss out on almost £26,000 in state pension income over 15 years due to frozen payments, according to new analysis.

While British retirees that move abroad still receive a UK state pension, only some of them benefit from the triple lock, as it depends which country they reside in. The triple lock uprates the state pension each year in line with earnings, inflation or 2.5%, whichever is higher.

The full new state pension is currently worth £230.25 a week, or £11,973 a year.

However, someone who retired abroad to a country 15 years ago where UK state pensions are not increased, such as Australia, Canada or South Africa, would have had their annual state pension frozen at £5,077.

A pensioner living in the UK would have received the same amount in 2010, but they would have had it uprated each year. Over 15 years, the lost state pension for the expat amounts to £25,832, according to calculations by Interactive Investor.

Over a decade, the lost income amounts to £13,162, while a retiree who moved abroad five years ago would have missed out on £7,391.

Myron Jobson, senior personal finance analyst at Interactive Investor, comments: “Many pensioners dream of spending their golden years overseas - whether it’s for a warmer climate, an improved quality of life or to be closer to family and friends. But while the lifestyle may be appealing, it’s vital to consider how such a move could affect your state pension entitlement.

“If you move to a country where the UK has no uprating agreement, your state pension will be frozen at the level you first receive it. That means you won’t benefit from the valuable triple lock increases that pensioners in the UK enjoy each year, and over time, that can seriously erode your spending power.”

The International Consortium of British Pensioners (ICBP) estimates that 453,000 pensioners do not receive annual upratings.

It has spent years lobbying for a change in government policy so that all British expat pensioners get their state pensions uprated.

We look into which countries are affected by frozen state pensions, how much British expats lose out on – and how you can prepare if you’re thinking of retiring abroad.

Which countries are affected by frozen state pensions - and why? 

More than 40% of the 1.12 million pensioners living overseas are affected by frozen state pensions, according to Department for Work and Pensions (DWP) data. This equates to just under 4% of the 12.7 million people receiving state pension payments.

British citizens who move to a country in the European Economic Area, Gibraltar, Switzerland, and other countries including the USA and Jamaica receive annual increases to their state pension.

However, countries including Australia, Canada, New Zealand, India, Pakistan, Bangladesh, many Caribbean islands, and all African countries do not benefit from any kind of uprating.

The ICBP says there is “no reason other than this situation has existed for over 70 years”.

The UK government says the reason is due to which countries have reciprocal social security agreements with the UK.

A petition to end “frozen pensions” has attracted more than 174,000 signatures.

It claims that the “UK government continues to refuse to enter into any new agreements – agreements that would end this pension injustice for all”, adding: “This policy can have a devastating impact on the lives of those affected and, for some, the income lost can mean a retirement of poverty.”

How much money do expats receive from their frozen state pensions?

According to calculations by Interactive Investor last year, based on data from the DWP, those living overseas with a frozen state pension receive just £3,000 a year on average – about £7,000 less on average than retirees living in the UK.

The payment gap widens significantly with age as the impact of the freeze compounds over time. Based on data in 2024, those in their 90s with a frozen state pension receive just £1,896 each year on average, compared to £10,809 for a pensioner living in Britain – a difference of £8,913.

Jobson says the frozen state pension policy can significantly impact UK expats’ “financial comfort in later years, leaving some facing poverty in old age”.

The ICBP gives the example of Anne Puckridge, a 100-year-old World War Two veteran who lived and worked in the UK until the age of 76, paying her National Insurance in full. Anne’s pension was “frozen” at £72.50 per week when she left the UK for Canada in 2001 to be closer to her daughter and grandchildren. Had she stayed in the UK, she would be receiving state pension payments worth £169.50 per week.

However, many “frozen pensioners” receive less than Anne: 49% receive £65 per week or less, according to the consortium.

How can I plan for a retirement abroad?

If you’re thinking of retiring abroad, check to see if your state pension will be frozen in that country. The DWP has a handy list showing the countries where it does pay an annual increase to the state pension.

If you are going to suffer from a frozen state pension, Jobson says planning ahead is key, and it could be worth speaking to an independent financial adviser to fully understand the implications of retiring abroad.

According to Interactive Investor, British pensioners considering retirement overseas during the current tax year could miss out on nearly £70,000 in state pension payments over 20 years if their entitlements are frozen when they move.

This assumes full state pension payments are uprated by 3.7% in April 2026 (the Office for Budget Responsibility’s inflation forecast for September 2025), and by 2.5% per year thereafter in line with the triple lock.

Jobson suggests: “Consider topping up any gaps in your National Insurance record to maximise what you’re entitled to. Deferring your state pension can boost the amount you get, though it won’t help with uprating in frozen countries.

“Most importantly, building a strong private pension pot can help provide the financial cushion you’ll need to maintain your standard of living abroad, regardless of state pension freezes. Budgeting carefully and preparing for rising living costs can go a long way in making your retirement overseas both comfortable and secure.”

We look at what happens to your pension if you retire abroad in a separate piece.

As chancellor Rachel Reeves prepares to unveil her maiden Budget next month, speculation is mounting that pensions could be used as a cash cow to raise revenue for the Treasury.

There are plenty of pension reforms that could save money for the Labour government, from overhauling pension tax relief and chopping the 25% pension tax-free cash to making retirement savings subject to inheritance tax.

While the government has pledged to keep the state pension triple lock, it has already shown that it is not afraid of making “tough decisions”, including ones that affect the oldest members of our society. For example, scrapping the winter fuel payment for millions of pensioners.

Another potential change that Reeves and her colleagues might be considering is to increase the state pension age.

Such a move could raise billions of pounds, making it an attractive option for a government grappling with a £22 billion spending shortfall that it says it inherited from the Conservatives.

However, it would also be an emotive issue, not least due to the “Waspi” situation, where campaigners claimed that a rise in the state pension age was poorly communicated to women born in the 1950s, leaving many with a financial loss. Earlier this year, the government was found guilty of maladministration. 

Any change to the state pension age would certainly hit the headlines, and depending on what was announced, could even trigger a revolt. In other countries, like France and Russia, there have been large-scale protests over raising the retirement age. 

Regardless of what the UK government announces in the Budget on 30 October, the issue may return to the headlines in the coming months anyway, because a decision to accelerate state pension age rises was delayed ahead of the election but will need to be dealt with soon.

We look at the current timeline for state pension age increases, and whether the Labour government could speed things up.

What is the current timeline for state pension age increases?

The state pension age is currently 66. It is due to go up a couple of times over the next 20 years:

• The state pension age will rise to 67 between 2026 and 2028
• It will then rise again to 68 between 2044 and 2046

The government has legislated for these increases, however, the timing of the rise to 68 could be changed and will be looked at by an independent review.

These reviews are held each parliament. They offer recommendations, which the government can accept or reject. The 2017 review suggested the rise to 68 should be in 2037-39. The 2022 review recommended a slower increase to 68, in 2041-43, and it mooted a possible rise to 69 in 2046-48. 

The government acknowledged the recommendations but delayed the decision, saying it would hold another review within two years of the next parliament.

According to the investment firm Fidelity International, the people most impacted by this are:

• The rise to 67 affects those born on or after 5 April 1960
• The rise to 68 (between 2044 and 2046) affects those born on or after 5 April 1977

The case for raising the state pension age faster - and higher

Various think tanks and policy experts have warned about the unaffordability of the state pension.

Earlier this year the International Longevity Centre said the UK state pension age may have to rise to 71 by 2050 to keep up with longer life expectancy, and to ensure there are enough people left in the workforce to pay tax to help fund the state pension.

Meanwhile, a recent report from the London School of Economics (LSE) argued that the state pension age should be increased to 68 “as soon as possible” - rather than waiting until 2044 to 2046.

The report notes: “This delay will create heavy pressures on the budget. The last government were considering making the change in 2037-9, but is that soon enough?”

According to the LSE, the “savings to the Exchequer from a one-year rise in the pension age (to 68) could be a huge £6.1 billion”.

The authors looked at the benefit/cost ratio of raising the pension age to 68, and calculated that the “loss of wellbeing equivalent” was £1,830 per person aged 67, while at the same time the government saves £7,625 per person. 

They conclude: “So we can ask: What is the benefit/cost ratio from not raising the pension age to 68. The benefit/cost ratio is 0.24. This is a small number. It constitutes a strong argument for raising the pension age to 68 as soon as is possible.”

The ballooning cost of the state pension is well illustrated when looked at in terms of percentage of GDP.

The Office for Budget Responsibility expects the cost of the state pension as a percentage of GDP to rise from 4.8% to 8.1% by 2071.

Andrew Oxlade at Fidelity International comments: “The stated aim has been to keep it below 6%, a level it would breach somewhere in the late 2040s. The primary ways to mitigate this are either slower rises in the state pension, which would involve watering down or abandoning the triple lock, or to increase the age of state pension eligibility.”

The argument against raising the state pension age faster

However, some experts argue that if the state pension age rises earlier, millions of retirees could be left struggling.

According to research by SunLife, the state pension is the only source of income for one in four (24%) of retired people – while 28% of over 50s not yet retired have no pension savings apart from the state pension. The maximum new state pension is £11,502 a year.

Mark Screeton, chief executive at SunLife, comments: “According to Retirement Living Standards, an individual needs an annual income of £14,400, for a ‘minimum standard of living’ while for a ‘moderate’ standard of living, an income of £31,300 is needed. This means that the current new state pension falls well short of what is needed for pensioners to get by, let alone live well.

“Therefore, if the state pension age were to rise to 68 by the early 2030s rather than 2044-46 as currently planned, millions could be left struggling with no private pension savings to fall back on.”

Age UK raises the point that many older people are unable to work due to ill health and a faster rise in the state pension age “would be deeply unfair and condemn many to even deeper poverty”.

Caroline Abrahams, charity director at Age UK, explains: “Waiting longer for your state pension may be ok if you are lucky enough to be fit and well and to have a good job which you really enjoy, but that's not everyone's experience. Unfortunately, there are millions of people in their late fifties to mid-sixties who are struggling on a very low income because they are out of work due to ill health, a caring responsibility or unemployment - and the widespread ageism in the jobs market hardly helps.”

She adds that if and when a government does raise the retirement age again, “we think they should exempt certain groups of people who through no fault of their own just can't work for any longer, such as those who are very unwell or carers. A one-size-fits-all state pension age is increasingly hard to justify."

Ros Altmann, a former pensions minister, tells MoneyWeek that she hopes the government does not increase the state pension to 68, as “the people who will lose out are the poorest and those in worst health who are unable to keep working but don’t have enough money to retire on”. 

So, will Labour raise the state pension age?

It would be a brave government to accelerate planned increases to the state pension age, especially given the fall-out over changes to the winter fuel payment. There's an outside chance that it could be mentioned in next month's Autumn Budget. 

However, the issue will emerge again within the next year or so when an independent review checks the scheduled increases and makes any further suggestions. 

How the government responds could depend on how badly it still needs to raise revenue, whether we have seen any increase to healthy life expectancy and how much notice it thinks is right to give workers approaching retirement.

The official state pension age is rising from 66.

From April 2026, those born between 6 April 1960 and 5 March 1961 will receive their state pension somewhere between age 66 and 67, as part of a phased process which is ending in 2028.

The government is raising the threshold at which you can receive the benefit as life expectancy increases and its cost grows.

Tom Selby, director of public policy at investment platform AJ Bell, said: “The state pension is the bedrock upon which millions of Brits build their retirement plans.

“However, the sands are shifting, with a long-trailed hike in the state pension age to 67 kicking off from April this year and completing in 2028. In the short term that is a recipe for confusion – many of those affected during the transition will inevitably be completely unaware that this is happening and have to plug an income gap, albeit potentially only for a few months, as a result.”

Despite the major changes coming to the state pension age, research suggests a lack of knowledge about it.

In a recent poll of 2,000 people, carried out by AJ Bell, only 19% correctly identified the state pension age as 66.

We take a closer look at when you can expect to receive your state pension based on your age. Plus, could it go up faster than scheduled, and might we really have to wait until age 70 or later for our state pension?

We look at how much you need for a minimum, moderate and comfortable standard of living in retirement in a separate piece.

When will you get your state pension?

The state pension age is due to go up a couple of times over the next 20 years. It is rising to 67 between 2026 and 2028, and again to 68 between 2044 and 2046.

A quick and simple way to check your retirement age is to use the tool on the government website. Bear in mind that the result you get today could change in the future if the government introduces new legislation.

If you’re close to being eligible for a state pension, you should receive a letter from the Department for Work and Pensions one month before you are entitled to it. It will tell you how and when you can claim it.

Bear in mind, you don’t have to claim your state pension and can defer it, potentially pushing up your payments when you come to claim it.

Those born between 6 April 1960 and 5 March 1961 will hit state pension age in a phased manner. The increase will be as below:

Source: Gov.uk

Under the current law, this is what date some people will reach the state pension age of 68 as part of the phased approach:

Source: Gov.uk

Will the state pension age rise again in future?

A recently-launched State Pension Age Review has caused concern that the government may choose to speed up the currently planned increases in the state pension age. It made the announcement at the same time as reviving the Pensions Commission, which will look at tackling the “retirement crisis that risks tomorrow’s pensioners being poorer than today’s”. The government warns that too many working-age adults (45%) save nothing at all into a pension.

Meanwhile, a report from the Office for Budget and Responsibility (OBR) highlighting the spiralling cost of the state pension has led some experts to speculate that the minimum age at which people claim the benefit may have to rise to 70 and beyond.

Bear in mind that the state pension age is different to your own retirement age. You may choose to retire earlier. Most people have a private pension – such as a workplace pension or a SIPP – which they can access from age 55 (rising to 57 in 2028).

The state pension is only supposed to support a minimum standard of living in retirement. But it remains an important part of many people’s retirement strategy. For 24% of savers, it is the only source of income they will have once they quit the workplace, according to research from financial services company SunLife.

By law, the government must review the age at which people can claim the state pension every six years – the last one concluded in 2023 and the latest review is set to last until 2029. The review will consider whether the current state pension age is still appropriate, based on things like the latest life expectancy data, fairness between generations and international comparisons.

Many experts expect the review to recommend that the state pension age increases be sped up. However, the government does not have to accept the recommendations. While raising the age would certainly save money, it would also draw criticism and potentially lose Labour voters.

Damon Hopkins, head of DC workplace savings at the consultancy Broadstone, said he wouldn’t be surprised to see an acceleration applied to the increase of the age.

He commented: “The combination of an ageing population and the huge fiscal cost of the state pension would suggest that a change is inevitable.”

Kirsty Anderson, retirement specialist at the wealth manager Quilter, added: “Accelerating the rise to 68 may be necessary to protect sustainability, but must be justified with updated life expectancy data and a clear understanding of regional disparities.”

In terms of future increases, the consultancy Barnett Waddingham points out that the OBR’s Fiscal risks and sustainability report shows the cost of the state pension as a proportion of GDP doubling over the next 50 years, driven by a growing retirement population relative to the working age population.

Jack Carmichael, senior consulting actuary at Barnett Waddingham, argued that keeping the cost of the state pension at a similar proportion of GDP would require a “massive increase in the state pension age, potentially up to the dizzying heights of age 80”.

Plenty of other experts have warned that the state pension age needs to go up. A report published by the International Longevity Centre in 2024 said the state pension age may have to rise to 71 by 2050 to ensure there are enough people left in the workforce to keep funding the retirement benefit.

Meanwhile, the London School of Economics published a separate report that argued the state pension age should be increased to 68 “as soon as is possible” rather than waiting until 2044-2046.

Why is the state pension age rising?

The basic state pension was introduced in 1948, three years after the end of the Second World War. Retirement age was set as 60 for women and 65 for men.

At the time, most pensioners were only expected to live for a few years after reaching state pension age. However, as living standards have improved, life expectancies have stretched, meaning some people are now spending up to a third of their life in retirement.

In a 2023 review, the Department for Work and Pensions pointed out that men born in 1951 were expected to live to 76 and women to 81. Meanwhile, men born in 2020 are expected to live to 87 and women to 90.

This means the state pension is becoming increasingly expensive for the government to fund.

Estimates by the government suggest £146.1 billion was spent paying for the state pension in 2025/26.

Meanwhile, raising the state pension from 66 to 67 alone will save the government £10 billion a year by 2029, according to the IFS.

The rate of inflation hasn’t helped matters recently. Each year, the amount of state pension that retirees receive increases in line with inflation, wage growth or 2.5% – whichever measure is highest. This “triple lock” helps protect pensioners against the rising cost of living, but it is expensive for the taxpayer.

For example, the full new state pension rose by 4.8% to £241.30 per week (£12,547 a year) in April 2026.

When all these factors are considered, it is perhaps unsurprising that the state pension age is rising. However, continually pushing retirement back for thousands of savers isn’t a quick fix either. The injustice suffered by the Waspi women in recent years is just one example of the problems that can come with changing the system.

What risks are associated with a rising state pension age?

An ageing workforce isn’t ideal from a health or efficiency perspective, and could bring problems as the state pension age continues to go up.

“The higher the state pension age, the more individuals will struggle to stay in work. This could be because of their health, a physically or mentally taxing job or caring responsibilities for elderly parents,” said Steven Cameron, pensions director at financial services company Aegon.

He adds: “We’re already seeing increasing numbers of over 50s exiting the workforce due to ill health. An ever-rising fixed state pension age could become increasingly divisive and out of sync with today’s flexible private pensions world.”

Ill health isn’t the only reason older employees dial back their working hours, though. Many pensioners play an important role in the economy as providers of free childcare.

“Our research shows that 59% of grandparents are relied upon to provide free childcare for their grandchildren, saving families a combined £90 billion in childcare costs,” said Mark Screeton, chief executive at SunLife.

“If the state pension age were to rise [further or more quickly], it could have a knock-on effect on families across the UK who will no longer be able to rely on grandparents to help out as they themselves could still be working.”

Finally, increases to the state pension age will leave households reliant on their private pension savings for longer, if they decide to quit the workplace before claiming their state pension.

This comes at a time when many savers are already struggling with a pension shortfall thanks to the higher cost of living. Research from savings platform Flagstone reveals just 14% of people are on track to retire at a desired age of 61.

Pensioners could enjoy a pensions boost of £460 next April thanks to wage growth and triple lock rules.

Under the triple lock arrangement, the state pension goes up automatically by either 2.5%, inflation, or average wage growth - whichever is higher.

Official data published on Tuesday (10 September) shows that annual wage growth, including bonuses, increased by 4% for the three months to July.

This suggests the new full state pension is set to increase by £460 next April, based on the latest wage figures.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, says: “It’s a much smaller increase than those we’ve seen in recent years, but remains comfortably above inflation, so will give retirees some much-needed breathing space in budgets."

However, the increase will be offset by the removal of the winter fuel payment for millions of pensioners, worth up to £300 this winter.  n July, the government announced that the benefit would be means-tested. To qualify, retirees will need to claim Pension Credit. 

Morrissey says the loss of winter fuel payment "will be especially keenly felt by older pensioners on the basic state pension. They receive the largest amount in winter fuel payment, but will see a smaller increase in their state pension, as they're not on the new flat rate".

How much state pension will I get in 2025? 

We’ll have to wait a little longer for confirmed figures. The final decision on the state pension uprating will be made by pensions secretary Liz Kendall ahead of the Budget next month.

However, Labour has repeatedly pledged its commitment to the triple lock, so we are not expecting any surprise announcements about changing the policy. 

The full new state pension is currently worth £221.20 a week - or £11,502 a year. The new state pension is paid to men who were born after 1951 and women born after 1953.

If the annual payment rose by £460 in April, it would increase to £11,962. 

Will I have to pay tax on my state pension? 

If the state pension hits £12,000 next April, it will be just under the tax-free personal allowance (£12,570).

Morrissey notes that this is "perilously close to the limits of the personal allowance". The allowance is expected to be frozen at £12,570 until 2028, meaning "there’s every chance we could see the state pension become taxable in the near future", according to Morrissey.

However, due to complexities in the state pension system, some retirees already pay tax on their state pension income.

The pension consultancy LCP estimates that more than one in five of all pensioners have state pensions in excess of the personal allowance, with about 2.5 million pensioners paying tax on their state pension.

Of course, the state pension isn’t the only income most pensioners receive. Most people pay into a workplace pension over the course of their working life, while others may have a private pension or SIPP. 

This means some pensioners are already paying a significant amount of income tax – and the burden is growing thanks to the effects of fiscal drag.

Will we see any changes to the state pension in the Budget?

Labour has promised to conduct a large-scale pensions review as part of this parliament, but we don’t yet know if this will affect the state pension, or the tax rules that govern workplace and personal pensions. Further details are expected in Rachel Reeves’s first Budget on 30 October.

Labour has already chosen to mean-test the winter fuel payment, and there is speculation it could also means-test the state pension in a bid to save money. 

Morrissey notes that "the rumours will cause an enormous amount of worry, because the state pension forms a vital part of pensioner incomes".

Almost 2,000 people could be missing out on a “pensions goldmine” due to unclaimed payments following an investigation into government state pension errors.

The department for work and pensions (DWP) is currently sifting through hundreds of thousands of cases after investigations found more than 200,000 people have missed out on higher state pension payments dating as far back as 1985.

The errors related to inaccuracies in National Insurance records, meaning those who took time off to raise a family – particularly women - and claimed child benefit before 2000 may have missed out on a higher state pension payment.

Former pensions minister Steve Webb, who uncovered the discrepancies, has also highlighted other state pension mistakes.

More than £570 million worth of state pension underpayments have been identified by DWP so far but the payouts could be closer to more than £3 billion.

However, some pensioners who are owed money or their relatives may be missing out if they haven’t responded to DWP letters.

A freedom of information request by Webb, now a partner and consultancy LCP, revealed that as of the end of July 2024, 1,859 people who had received letters telling them about potential underpayments to their late parents or late spouse had not responded. 

Unless DWP receives a reply to these letters, the underpayment will remain unclaimed and goes into the government's coffers.

Who is affected by state pension underpayments?

Most of the errors are from before the new state pension launched in April 2016 and affect married women who didn’t get an automatic increase when their husband retired under old rules.

It could also affect widowed pensioners from before 2016 who couldn’t get the full basic state pension based on their own contributions but could have inherited payments from their spouse or civil partner.

The DWP has been writing to those affected to get them to claim the money owed.

But Webb’s latest research shows there are cases where money could have been owed to a widow who has since died.

There are 1,671 letters to next of kin flagging potential underpayments of this sort to which DWP has yet to receive a reply, Webb said.

A further 131 relate to cases where a married woman’s low pension was not automatically increased when her husband retired, and 57 cases relate to underpaid pensions to the over 80s.

The DWP says it only works out the amount potentially owed when it receives a reply to the letter, but in the past underpayments have ranged from a few pounds to over £100,000, so it is worth checking the post.

Webb warns that these letters arrive “out of the blue” and people may not realise the importance of responding.

How to find out if you are affected by state pension underpayments

The DWP is supposed to write to you to tell you about potential underpayments and to arrange to get any money owed sent to you.

But, not everyone will get automatic payments and you may have to find out for yourself. 

If you believe you may have been affected, contact the Pension Service directly. 

LCP’s state pension underpayment tool also lets you work out what you could be owed.

You could be owed £1000s, so it is worth checking if you claimed child benefit before 2000. 

“We know that well over 100,000 people were underpaid state pensions and DWP has spent more than three years trying to track them down,” says Webb.

“In thousands of cases, the person who was underpaid is sadly no longer with us, but their heirs should still benefit from any underpayment.

“Although not all underpayments are large, in some cases, people have received £100,000 or more, so the recipients of these letters could be sitting on a pensions goldmine. If you have received a letter from DWP about a potential underpayment to a loved one, I would urge you to respond as soon as possible.”

A fresh wave of state pension errors has been uncovered by former pensions minister Sir Steve Webb.

Thousands of women have already been identified by HMRC as missing state pension payments. These cases relate to inaccuracies in National Insurance records for mothers – and some fathers – who took time off to raise a family. The government has been accused of making slow progress in reviewing the cases. 

Webb has previously warned that the Department for Work and Pensions (DWP) may have made mistakes when working out the amount of state pension for divorced people. But now, he has issued a new warning that people claiming the state pension, who were already widowed when they retired, may not be getting the correct payout.

“Having had to spend years checking hundreds of thousands of historic state pension calculations for errors, you would hope that the DWP would be making sure that new claims are handled correctly,” comments Webb, a partner at the pension consultancy LCP.

“But we have found worrying evidence that this is not the case. There seems to be a particular problem for people who are widows or widowers when they claim their state pension.”

Webb says the error could cost retirees £40,000 over a 20-year retirement. He has demanded the government launch an urgent investigation into the scale of the problem.

We look at who is affected and how to check your status.

Who is affected by these new state pension errors? 

People widowed before they turn 66 are being urged to check they are not losing out on any state pension that they should inherit from their spouses.

Webb was recently contacted by four people who had not been awarded any inherited state pension when they retired. They were told by the DWP (in writing or over the phone) that they were not entitled to the money. But, in all four cases, this was incorrect. The amount of state pension has now been increased and arrears have been paid. 

Two of the cases were awarded more than £2,000 a year, "so if the error hadn’t been picked up they could have lost out on £40,000 over a 20-year retirement", said Webb.  

He adds: “In some cases, the DWP seems to have failed to automatically add any inherited state pension they were due from a late partner.

“These cases may well be the tip of an iceberg, with many thousands of people potentially underpaid.”

According to Webb, the group most affected are those who are widows or widowers at the point when they claim their new state pension, and where either:

• The late spouse reached pension age before 6th April 2016 OR
• The late spouse died before 6th April 2016

In this case, the widow or widower can potentially inherit at least 50% of any “additional state pension”, which the late spouse built up, plus 50% of any “Graduated Retirement Benefit”.

MoneyWeek asked the DWP about these latest errors. It said: “Delays can occur to a customer’s state pension award when not all the information we need is provided. In these cases, we will make a state pension award based on the customer’s own National Insurance record until we have the required information.

“Once we have the necessary documentation, we will revise the customer’s claim as soon as possible.”

How much state pension could widows/widowers be losing out on?

The exact amount of inherited state pension will depend on personal circumstances. However, Webb says the amount increases if:

• The late spouse was an employee (rather than self-employed) AND
• The widow/widower is not receiving a widow’s pension from a company pension scheme (as this may replace part of any inherited state pension due)

More generally, the amount of inherited state pension someone is due can depend on things like:

• Whether the claimant comes under the old or new state pension system
• Whether the late spouse came under the old or new state pension system
• When the late spouse died
• Whether the late spouse was a member of a ‘contracted out’ occupational pension scheme

Webb tells MoneyWeek that in an extreme case, someone who had wrongly not been given inherited additional state pension could inherit the maximum additional state pension, which is more than £200 per week.

This equates to £10,400 a year - or £208,000 over a 20-year retirement. "I don’t suppose it would happen often, but it’s possible in theory," notes Webb.

How to check if you've been underpaid

LCP has created a new state pension tool to help widows and widowers check their state pension and understand what money they are entitled to inherit on top of their own state pension. The consultancy said its previous tool to help married women check for underpayments had received more than one million visits.

The government also has a tool to assess someone’s eligibility for inherited state pension amounts. There is more information on inheriting or increasing a state pension on the GOV.UK website.

What’s happening with the DWP’s state pension errors investigation?

The DWP has been undergoing a correction exercise designed to fix previous state pension errors relating to three groups of people since 2021. These are married people, widowed people and the over-80s. 

More than £280 million has been paid in arrears, so far, to around 23,000 widows and widowers who had wrongly missed out on an inherited state pension from a late husband, wife or civil partner. About £245 million has been paid to married people, while £67 million has been paid to the over-80s.

The government had previously identified more than £570 million of state pension underpayments – but this figure is set to soar.

The correction of historic errors for widows and widowers will run until the end of this year. Current estimates of the total arrears is £970 million due to 133,000 pensioners, according to the DWP’s annual report. 

The Department for Work and Pensions (DWP) has come under fire for making snail’s pace progress in addressing the second batch of state pension underpayments due to errors, affecting 200,000 mothers.

The errors relate to inaccuracies in National Insurance records, meaning those who took time off to raise a family and claimed child benefit before 2000 may have missed out on a higher state pension payment.

But, of the 200,000 cases, only 12,000 have been paid arrears according to the latest data from the DWP, which started started checking records back in March 2021.

The DWP said that fixing the problem is likely to continue into 2027/28 - but the slow progress means parents, mostly mothers, could be missing out on thousands of pounds in compensation.

Steve Webb, partner at pension consultants LCP and a former pensions minister, said: “It is deeply disappointing that efforts to track down mothers being underpaid their state pension have so far failed to reach the vast majority of those who the government thinks have lost out."

These errors are just one group of many. Other groups also affected by admin errors relate to married women, widows and the over 80s - the pension errors have a combined value of £594 million.

Pension errors for mothers: who was affected by the underpayments?

This batch of state pension underpayments affects mothers who did not get the home responsibilities protection (HRP) on their National Insurance record.

The HRP was in place to ensure women who took time off to raise a family would have their pension protected with National Insurance credits.

But, it was found that many child benefit claim forms submitted between 1978 and 2000 did not include a National Insurance number, meaning records did not sync.

"One of the challenges is that HMRC has destroyed all its old child benefit records and therefore has to undertake a ‘fishing expedition’ writing to women potentially affected and encouraging them to make a claim," Webb said.

But in some cases, HMRC has written to very elderly pensioners encouraging them to check their eligibility on a website before submitting a claim - or has asked for records and information about children, which parents may not have.

"Writing letters to elderly people which guide them towards a two-stage online process was always going to have a low success rate. People are understandably wary of scams, and expecting them to do their own online eligibility check before submitting an online claim was bound to put many people off," said Webb.

"Whilst DWP deserves credit for conducting research into the reasons for the failure of the strategy so far, it is vital that efforts are now redoubled to make sure that far more people get the state pension that should have been theirs by right”.

Even when HMRC has identified a potentially eligible woman and has received a claim form in response, it then needs to update NI records and then DWP has to do a state pension reassessment."

This process means that only 12,000 mothers who have lost out have so far been paid out since the process started five years ago.

Of the estimated 194,000 affected, around 151,000 are still alive, but 43,000 have died.

A government spokesperson told MoneyWeek previously: “We are correcting an issue related to the historical recording of HRP on the National Insurance records for people who first claimed Child Benefit before May 2000.

“Most people’s records will be unaffected, and we have an online tool to help people check whether they need to claim.

“State pension underpayment rates are very low but where errors do occur, we are committed to fixing them as quickly as possible.”

How to find out of you’re affected by state pension underpayments

If you have been underpaid, the DWP is expected to write to you and send a payment.

But, not everyone will get automatic payments and you may have to find out for yourself. You can check using Pension Service directly.

You could be owed £1000s, so it is worth checking if you claimed child benefit before 2000.

The state pension has increased by 4.1%, boosting the income of 12 million retirees, but frozen tax thresholds mean hundreds of thousands of pensioners will be dragged into the tax net.

The full new state pension is now £11,973 per year, or £230.25 a week.

It means recipients who receive more than £597 in other income in 2025/26 – be it from a private or workplace pension, or work – will be pushed beyond the tax-free personal allowance of £12,570.

The rise puts pensioners “perilously close to the amount that can be received without incurring tax liability”, Clare Moffat, pensions expert at Royal London, says.

Around 350,000 more pensioners will pay tax this year compared to 2024/25, according to analysis by former pensions minister Steve Webb.

Webb, who is now a partner at pension consultancy LCP, said 650,000 retirees will be paying income tax on their state pension alone in this tax year.

“The repeated freezes in the personal allowance for income tax, coupled with a series of significant cash increases in the rate of the state pension, have led to a situation where the majority of pensioners now pay income tax,” he said.

“Hundreds of thousands more will be dragged into the tax net this year, and some can look forward to an end-of-year ‘simple assessment’ tax demand from HMRC if they do not have any other pension income where a tax code can be used to collect what is due.”

More and more pensioners are set to be affected in future years as, if income tax thresholds are not adjusted, the full new state pension is expected to bust the personal allowance as soon as 2027.

Will I have to pay tax on my state pension?

The full new state pension of £11,973 a year is now just under the tax-free personal allowance (£12,570).

Tax thresholds have been frozen for over three years now, and aren’t expected to go up until 2028 at the earliest.

The latest forecast from the Office for Budget Responsibility (OBR), released alongside the Spring Statement in March, suggests the state pension will rise by 4.6% next year under the triple lock. That would take it to £12,569.85 a year – just 15 pence below the tax-free allowance – according to Quilter.

Greer at Quilter comments: “The OBR’s latest forecasts confirm we are fast approaching a bizarre tax cliff edge for pensioners. With the state pension forecast to rise by 4.6% in April 2026 under the triple lock, it will land just below the frozen personal allowance.”

He adds: “What was intended as a mechanism to protect pensioners from poverty is now colliding with fiscal drag. This situation is the result of the triple lock producing some significant increases in the state pension due to high inflation and earning figures while the government has failed to uprate tax thresholds in tandem.”

The OBR predicts the state pension will then rise by 2.5% in 2027/28, taking the full new state pension to £12,885.50 a year – busting the personal allowance by £315.50.

Due to complexities in the state pension system, some retirees already pay tax on their state pension income.

The pension consultancy LCP estimates that more than one in five of all pensioners have state pensions in excess of the personal allowance, with about 2.5 million pensioners paying tax on their state pension.

Moffat at Royal London explains: “That’s normally because they’ve delayed taking their state pension or have larger amounts of additional state pension.”

In addition, most pensioners receive other income on top of the state pension. They may have a workplace pension, private pension or self-invested personal pension (SIPP).

This means some pensioners are already paying a significant amount of income tax – and the burden is growing thanks to the effects of fiscal drag.

HMRC data suggests around 8.51 million pensioners would be liable for income tax in the 2024/25 tax year. That’s 660,000 more than in 2023/24.

Meanwhile, those who already pay income tax on their pension, but at the basic rate, could find themselves pushed into a higher tax band due to the growth of the state pension.

Moffat notes: “Our research found that 21 million people aged 21-65 are unaware that the state pension is taxable, so it could come as a shock to many. Pensioners receiving additional income from private or workplace pensions will see a reduction in their monthly income payments due to tax deductions.”

In the lead-up to the general election, the Conservatives promised to increase the personal allowance for pensioners as part of their “triple lock plus” election pledge. However, this was consigned to the policy dustbin when Labour won the general election.

How much state pension will I get this year?

Following the 4.1% rise, the full new state pension is now worth £230.25 a week – or £11,973 a year. This is paid to everyone who reached state pension age after April 2016, entitling them to the “new” state pension, provided they have enough qualifying years on their National Insurance record.

Not everyone receives the full new state pension. Some people receive less.

If you reached the retirement age before this date, you may be entitled to get a lower amount of £176.45 a week on the “old” state pension. The full “old” state pension – known as the basic state pension – works out at £9,175 a year.

Ultimately, the amount you receive comes down to your age (in other words, do you get the new or basic state pension), and your number of years of recorded National Insurance contributions (NICs).

For the old pension you needed 30 years' of NICs, but for the new state pension you have to have 35 years of NICs to get the full amount, and at least 10 years to qualify for it at all.

You can get a state pension forecast from the government showing how much you could get.

Does everyone’s state pension increase with the triple lock?

The 4.1% increase is thanks to the triple lock, a guarantee by the government that the state pension will increase each year by the highest of three measures: inflation, average earnings growth, or 2.5%.

The September measure of inflation is used, which came in at 1.7%, while the wage earnings growth in the three months to July was 4.1%.

Not everyone’s state pension is protected by the triple lock.

Under a little-known rule, those entitled to an earnings-related pension on top of their basic state pension, relating to the pre-April 2016 rules, or who have topped up their state pension by paying extra National Insurance contributions, will see these elements increased in line with last September’s rate of inflation at just 1.7%.

Expat pensioners living in certain countries like Australia, Canada and New Zealand also do not benefit from the triple lock on their UK state pension.

We go into more detail about this in our article: Who will miss out on the state pension triple lock?