State pension likely to rise by 3.9% after key data released - but most will be taxed
New wage data point to a 3.9% triple-lock rise, lifting the full new state pension to about £13,036 and widening pressure on tax rules.
- On Tuesday, the Office for National Statistics confirmed 3.9% wage growth, triggering a triple lock increase that will push the full new state pension to around £13,036 annually from next April, breaching the £12,570 personal allowance for the first time.
- Under the triple lock policy, state pensions rise annually by whichever is highest of average wage growth from May to July, September inflation, or 2.5%. The 3.9% earnings figure currently outpaces both measures, making it the determining factor for next year's increase.
- Breaching the £12,570 personal allowance creates a fiscal challenge for the Treasury as nearly 13 million pensioners face potential tax liabilities. However, specific details on how the tax will be collected remain unclear ahead of next month's Budget.
- Pensions Minister Torsten Bell pledged that retirees solely dependent on state income will avoid tax, yet Sir Steve Webb of consultants LCP estimates the exemption would benefit only one in 16 pensioners, calling the plan a "mess."
- Chancellor John Healey will detail the exemption policy at the Budget on October 28, as economists including Ruth Curtice of the Resolution Foundation warn the triple lock creates a "ratchet effect" straining public finances long-term.
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British state pensions are set to rise by 3.9% from next April under the triple lock system, which would see the new full pension itself exceed the tax-free income threshold for the first time. The situation poses a serious dilemma for the government, as the frozen tax-free threshold would force some pensioners to pay income tax, the Financial Times reports.
State pension rises while youth unemployment goes up
State pensions are set to rise by nearly £500 a year - in line with the current increase in wages. But that jump means that even someone who only receives a full state pension would be liable to income tax. Government ministers say that won't be allowed to happen.
Sky News UK
Great Yorkshire RadioState pension likely to rise by 3.9% after key data released - but most will be taxed
Your state pension will likely rise by 3.9% next year, according to provisional data published on Tuesday morning by the Office for National Statistics.
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