UK state pension set to top £13,000

The UK’s full new state pension is on course to rise above £13,000 a year from April, after official wage figures pointed to a 3.9% increase under the triple lock.

The increase would lift the full, flat-rate state pension by about £488 a year to £250.70 a week, or £13,036.40 annually, for people who reached state pension age after April 2016. The old basic state pension, paid to those who reached pension age before April 2016, is expected to rise by £374.40 a year to £192.10 a week, or £9,989.20 annually.

The calculation is not yet final. Under the triple lock, the state pension rises each year by the highest of average earnings growth, inflation or 2.5%. The latest Office for National Statistics figures showed total pay, including bonuses, rose 3.9% between May and July, down from 4.2% between April and June. Pay excluding bonuses rose 3.5%.

That 3.9% earnings figure is likely to determine next year’s increase unless September inflation reaches 4% or higher. The Guardian reported that inflation is currently expected to remain below earnings growth.

The expected rise has renewed debate over the cost of the triple lock, which Labour pledged in its manifesto to keep until 2029. State pension spending is already £154bn this year, and forecasts suggest the policy could add a further £600m a year by 2029-30.

Ruth Curtice, chief executive of the Resolution Foundation, told the BBC the policy was “crazy” and said it was creating a “ratchet effect” in which “pensioners’ living standards grow even faster than just a typical worker.” She added: “Pensioners have seen living standards grow three times more than typical workers over the last 20 years.”

Jonathan Cribb, deputy director of the Institute for Fiscal Studies, said the cost of the policy is difficult to predict. “Each increase in spending builds upon the last and so the long-run cost is substantial but very uncertain,” he said.

Pensioner groups argue that many older people still face serious cost pressures, including high energy bills, and say the UK state pension remains relatively small compared with state provision across Europe.

Jon Greer, head of retirement policy at Quilter, said the latest wage data put a state pension increase of about 3.9% “firmly on the cards” for next April. “For pensioners, another above-inflation increase will be welcome news and reflects the success of the triple lock in strengthening the value of the State Pension over time,” he said. “The State Pension remains a crucial source of retirement income for millions of people.”

The rise would also take the full new state pension above the frozen personal allowance of £12,570, potentially making it liable for income tax. Almost 13 million people receive the state pension in the UK.

The Labour government, when Rachel Reeves was chancellor, had promised that pensioners relying solely on the state pension would not have to complete a tax return or be chased for payment. But Business Secretary Jonathan Reynolds declined to repeat that commitment when asked by the BBC, saying tax changes would be addressed in the Budget on October 28.

“The vast majority of people in Britain have their own private pension provision alongside the state pension so this wouldn’t be a substantial change for them,” Reynolds said.

Consultancy LCP said only one in 16 pensioners would benefit if the government kept that pledge, saving about £91 each a year, because most pensioners have additional income and already pay tax. Sir Steve Webb, an LCP partner and former Liberal Democrat pensions minister, said: “The government’s plans to address this point are a mess.”

Ian Futcher, a financial planner at Quilter, said the policy could create “an unusual divide” between pensioners whose only income is the state pension and those with modest private savings.

The ONS labour market figures also showed unemployment unchanged at 4.9%, while vacancies and the number of employees on payrolls fell in recent months.