Pensioners will enjoy another bumper boost to their state pension next month, although the increase will bring recipients closer to a “tax-cliff edge”.
The state pension increases in line with the triple lock, which means it goes up every April by whichever number is highest out of inflation, average UK 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%.
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This means the state pension will rise by 4.1% at the start of April. The full new state pension will increase from £221.20 a week (£11,502 a year) to £230.25 (£11,973).
Meanwhile, the "old" state pension – known as the basic state pension – will go up from £169.50 a week (£8,814 a year) to £176.45 (£9,175).
According to Clare Moffat, pensions expert at Royal London, about 12 million pensioners will receive more in their state pension from next month, due to the triple lock, “bringing them perilously close to the amount that can be received without incurring tax liability”.
The full new state pension of £11,973 a year will be just under the tax-free personal allowance of £12,570, meaning any extra income from, say, a workplace or private pension, or from investments or part-time work, will likely push retirees into paying tax, or result in a higher tax bill.
The state pension is expected to bust the personal allowance in the next few years, thanks to triple lock increases.
As Jon Greer, head of retirement policy at Quilter, puts it, “we are fast approaching a bizarre tax cliff edge for pensioners”.
Steven Cameron, pensions director at Aegon, notes that next month’s 4.1% boost to the state pension is also above the current inflation figures, which came in at 2.8% for February 2025.
“The drop in the inflation figure from 3% to 2.8%, coinciding with the Spring Statement, will be welcome news for the chancellor,” he said.
“These figures come just days before pensioners will receive a 4.1% increase to their state pension, meaning they’re on course for an above-inflation boost.
“There’s a considerable gap between the increase being set and it coming into payment the following April. But this year, the increase remains above the latest inflation figure, protecting pensioner purchasing power.”
Will I have to pay tax on my state pension?
The full new state pension of £11,973 a year – that will come into effect next month – will be 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 forecasts from the Office for Budget Responsibility (OBR), released alongside the Spring Statement, suggest the state pension will rise by 4.6% next year under the triple lock, taking 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.
As a result, HMRC data suggests around 8.51 million pensioners will 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?
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.
It will rise by 4.1% next month, taking the annual payment to £11,973. The increase will kick in on Monday, 7 April, this year, as the annual state pension change occurs on the first Monday following 1 April.
However, not everyone receives the full new state pension. Some people receive less.
Pre-2016 retirees will also get a 4.1% increase. It means those getting the full basic state pension will see a smaller boost of £361 a year.
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?
Not everyone’s state pension is protected by the triple lock.
Cameron notes: “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 Who will miss out on the state pension triple lock?
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