Pensions in the UK will rise by 4.8%: millions will receive additional funds.

Increase of the state pension from April 2024

According to The Sun: Millions of people receiving the state pension will receive an increase to £574.60 in April next year, which is a larger amount than previously expected.

According to the triple lock policy, the state pension increases annually based on inflation, 2.5% or average wage growth, whichever is highest.

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Today, the Office for National Statistics (ONS) released revised data regarding average wage growth for the year up to May-July 2025.

It turned out that total pay including bonuses for the three months to July was 4.8%, surpassing the previous estimate of 4.7%.

This means the new state pension, which applies to those who reached retirement age after April 2016, is now approximately £10 higher than if the increase had been based on last month's data.

According to new estimates, the new state pension will rise to £241.30 per week.

This increase of £11.05 will result in a total annual payment of £12,534.60, which is £574.60 more than currently.

A month ago, it was reported that the new state pension would rise to £241.05 per week or £12,534.60 per year.

Today's data also indicates that the old basic state pension is likely to rise to £184.90 per week or £9,614.80 per year.

Steve Webb, a partner at pension consultancy LCP, noted: 'We can be confident that the new state pension and the basic state pension will rise by 4.8%.'

'This means that the overall state pension will remain below the tax threshold for another year, but in 2027 it will exceed it if allowances do not increase,' he added.

Last month, the government confirmed it would adhere to the triple lock.

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During a speech, Pat McFadden, the new Secretary of State for Work and Pensions, stated that the Labour government intends to uphold the triple lock throughout this parliamentary term.

'It is expected that this will result in a state pension increase of approximately £1,900 per year by the end of parliament,' he said.

However, this means that the standard rate of the new state pension is nearing the frozen personal tax allowance.

Your standard personal allowance is the amount of income you can earn annually without paying taxes, and it is frozen at £12,570.

A pensioner with no other income besides the state pension will become a taxpayer starting in 2027.

In May 2024, former Chancellor Jeremy Hunt noted that the personal allowance would again be frozen at £12,570 until 2028.

This freeze was first implemented in 2021.

In her first budget in October, Chancellor Rachel Reeves was expected to continue the freeze until 2028.

However, she confirmed that the government would increase thresholds according to inflation from that date.

Many pensioners already pay taxes on their state pension due to additional payments.

In April of last year, it was reported that the triple lock system led to an increase in the number of pensioners paying taxes to 650,000.

How can you reduce your tax liabilities?

There are several ways you can use to reduce your tax liabilities.

One option is to take advantage of all available tax allowances.

For example, make sure you have opened a savings account in an ISA. These investments allow you to contribute up to £20,000 per year, and the interest or income you receive is not taxed.

This applies not only to the interest you earn but also to any withdrawals that are also tax-free.

For example, withdrawing 4% per year from £100,000 in an ISA will provide £4,000 tax-free per year compared to a regular savings account which incurs tax.

This can also be a good opportunity to utilize retirement savings.

You can save money for retirement tax-free, and any money you save in your pension funds can grow tax-free over time.

You can then withdraw up to 25% of your savings tax-free when you reach retirement age.

This can be done as a lump sum or gradually to supplement your state pension tax-free.

How does the state pension work?

Currently, the state pension is paid to men and women from the age of 66, but is set to increase to 67 by 2028 and 68 by 2046.

The state pension is a regular payment from the government that most Britons begin to receive when they reach retirement age.

However, not everyone receives the same amount, and you receive it based on your insurance history.

For most pensioners, this is only part of their retirement income, as they may have other funds from workplace pensions, earnings, and savings.

The new state pension is based on people’s insurance contributions.

Workers must have 35 years of insurance contributions to receive the maximum amount of the new state pension.

You earn qualifying years of National Insurance through work or by receiving credits, for example, when you are caring for children and receiving child benefits.

If you have gaps, you can fill your record by paying voluntary National Insurance contributions.

To qualify for the old basic state pension, you need 30 years of contributions or credits.

You need at least 10 years in your record to receive any pension.