Millions of Brits are set to get a boost to their state pension – find out how much YOUR benefits will rise

State Pension: An 8.5 per cent increase from today takes the full rate to £11,500 per year

Older people will get an 8.5 per cent increase on their state pension from today, making the new nominal rate £221.20 per week, up from £902 per year to around £11,500.

Those on the basic rate, who reached state pension age before April 2016, will get £169.50 per week, up from £692 per year to around £8,800.

People on the base rate also get big top-ups, called S2P or Serps, provided they earned them earlier in life.

This year’s increase was determined by the triple lock, whereby the state pension increases every year with the highest inflation, average income growth or 2.5 percent.

Last autumn’s wage growth figure determined the latest increase.

The state pension forms the basis of many people’s retirement finances, and a large group of retirees live entirely on it, so the increase will be particularly welcomed by those on low incomes.

The inflation rate has fallen sharply in recent months – it stood at 3.4 percent for the year to February, down from 4 percent in January – meaning state pensions will rise further.

However, the full rate has moved much closer to the personal allowance of £12,570, the threshold at which people start paying tax.

This means that a full state pension plus an even modest private pension means that part of your income can be reclaimed by the Treasury.

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The triple lock was introduced by David Cameron’s Conservative government in the 2011/2012 budget year to ensure that pensioners receive a decent income increase each year.

The 2.5 percent element continues to push interest rates higher, even in years when earnings and inflation are flat. See the table below which shows that it has happened four times over the years.

Critics point out that maintaining the triple lock is expensive when public finances are in a tight state, and question whether older people should get a huge state pension increase if some workers are paid below inflation rates.

Advocates say many retirees struggle to pay household bills while on a fixed income.

Britain also has the lowest state pension among rich countries, based on one of the most widely quoted international measures, although that doesn’t tell the whole story as some countries combine their state and workplace schemes into one system.

The Conservative party has already said it will make a pledge to maintain the triple lock in its manifesto at the next election, and according to recent media reports, the Labor Party plans to do the same.

This table shows the established AOW increases during the triple lock years (Source IFS)

This table shows the established AOW increases during the triple lock years (Source IFS)

Which AOW rules do you need to know?

The state pension age for men and women is 66 years and will rise again to 67 years between 2026 and 2028.

However, the timing of the next increase in the state pension age to 68 remains up in the air as the government has postponed a decision until after the next election.

Not everyone is entitled to the full state pension, a regular government benefit until your death. Eligibility depends on meeting certain criteria.

You must have paid National Insurance contributions for 35 years during your working life, or paid into voluntary National Insurance, or received credits from the government for the years you spent on care or other problems.

But even if you have paid the full amount for 35 years, you may still get less if you have entered into a contract to pay additional AOW entitlements (S2P and Serps) for a number of years on top of that.

Some elements of the old state pension – basic, serps and graduated pensions – are rising at a different pace than the triple lock.

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You must have a 35-year NI contribution record during your working life to get the full state pension - although some people who have 'outsourced' to pay extra NI may get less

You must have a 35-year NI contribution record during your working life to get the full state pension – although some people who have ‘outsourced’ to pay extra NI may get less

Everyone will have the opportunity to defer their state pension to get more in their later years, and to fill gaps in their NI record by buying top-ups to the state pension.

You can stop applying for the AOW after a certain period and therefore receive an increase in your benefit later, but this can only be done once.

If you continue working after the state pension age, you no longer have to pay national insurance contributions.

Retirees with a low income may be eligible for a pension discount. This increases weekly income to a minimum of £218.15 for singles and £332.95 for couples at the new 2024/25 rates.

An annuity equal to the full state pension would cost £250,000

“With inflation finally on the way out, this increase will provide much-needed breathing space to pensioners’ budgets stretched to breaking point by the cost of living crisis,” said Helen Morrissey, head of pensions analysis at Hargreaves Lansdown.


1712569015 604 Millions of Brits are set to get a boost to

‘However, there is quite a bit of criticism of the AOW. Despite two huge increases in recent years, this pension has been described as the worst in the developed world.

‘Such comparisons are unfair given the different forms of state pensions in different countries, and the fact remains that it provides a stable guaranteed income that is paid for life and is the foundation on which we build our retirement income.’

‘Its value can be demonstrated by looking at how much you would have to save in your own pension, as well as what you get from the state. Data from HL’s annuity search engine shows that at age 65 you would need a pension pot of around £125,000 to replicate what you would get from the basic pension.

‘If you want to generate enough to match the full new state pension, you’re looking at more again, at a whopping £160,000.

‘However, these annuities provide an equal income that does not change every year. If you also wanted an increasing income from your annuity, you would have to put much more aside.

‘You would need around £190,000 in pension to get a single lifetime annuity which starts around the level of the state pension and then rises in line with the RPI. To do the same for the new state pension you would need to get closer to £250,000.”

The increase in the state pension means that more elderly people will pay income tax

The triple lock will increase the full state pension to within a fraction of the amount you can receive without paying tax, says Royal London pension expert Clare Moffat.

‘Any income – including pension income – above the personal allowance of £12,570 is subject to tax.

‘So if someone’s income is higher than his personal allowance, which is not that difficult if he also receives a pension every month, he has to pay tax.

‘And what many people don’t know is that although the tax is not deducted from the state pension, it is part of their taxable income, and the tax will be deducted from their other (work or personal) pension.

‘Pensioners with a defined contribution pension and a drawing pension can minimize the amount of tax they pay. That’s because the income level can be changed to keep withdrawal income below the threshold.

‘Those in defined benefit schemes, where a fixed pension amount is paid out each month, such as public sector schemes, will often also rise in April. This, in addition to the increase in state pensions, will ensure that more income enters the taxable area.’

Triple lock means that the increase in state pensions exceeds inflation

If the full state pension had only risen in line with inflation over the past three years, it would have been £10,673 or more than £800 less, says Dean Butler, director of retail at Standard Life.

That means pensioners will be more than £800 a year better off as a result of the triple lock, highlighting how valuable the current top-up system is to them, he says.

But with the personal allowance frozen until 2028, the new state pension will make up 92 per cent of the tax-free personal allowance this year, meaning pensioners only need £1,068 in income before they start paying income tax, Butler explains.

‘There are a few steps that people with modest private savings, whose annual income is probably around the personal deduction limit, can take.

‘While 25 percent of pension savings can be withdrawn tax-free, the rest can be taxed. For those incomes that hover around the personal allowance, it is worth ensuring that they do not receive larger lump sums that they may have to pay tax on if they can be avoided.

‘If they do have Isa savings, it is not subject to income tax and can therefore be a useful source of extra income.’

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