Retirees across the UK have received positive news regarding their future finances. The state pension is projected to see a substantial increase in April 2027, potentially adding more than £500 to annual incomes for millions of pensioners.
This expected rise is secured by the government’s “triple lock” guarantee, a key policy designed to ensure the state pension keeps pace with the cost of living and wage growth. The mechanism dictates that the pension increases each year by the highest of these three figures:
Average earnings growth (from May to July of the previous year)
Consumer Prices Index (CPI) inflation (from September of the previous year)
A minimum of 2.5%
The latest Office for National Statistics (ONS) data, showing total earnings growth (including bonuses) at 4.7%, currently sets the benchmark for the 2027 increase. With inflation lower than this figure, the earnings growth element is likely to determine the final uplift, pending confirmation next year.
What the 2027 Pension Increase Looks Like
Based on the current 4.7% forecast, financial experts project the following weekly increases:
For those on the “New State Pension” (for individuals who reached state pension age after April 2016), the weekly amount is expected to rise from £230.25 to £241.05. This translates to an annual increase of over £560.
For those on the “Basic State Pension”, the weekly payment would increase from £176.45 to £184.75, providing a meaningful boost to income.
Government Reaffirms Triple Lock Commitment
The government has firmly committed to maintaining the triple lock policy. The Work and Pensions Secretary, Pat McFadden, recently stated, “This Labour government is committed to maintaining the triple Lock for the course of this Parliament,” estimating it will lead to a significant rise in the state pension over the coming years.
The Growing Tax Threshold Concern
While the increase is welcome, it highlights a growing issue for pensioners: the frozen income tax threshold. Helen Morrissey, Head of Retirement Analysis at Hargreaves Lansdown, cautions that the rise will bring the full new state pension amount to approximately £12,535 annually.
“This leaves pensioners just a whisker under the threshold of paying basic rate tax,” Morrissey notes. The personal tax allowance is fixed at £12,570 until at least 2028.
Sir Steve Webb, former Pensions Minister and partner at LCP, emphasises the inevitability of this issue: “We know for certain that someone who has no other income aside from the new state pension will be a taxpayer come April 2027.” This means any additional income from a small private pension or savings could push more retirees into paying income tax.
A Sustainable Future?
The triple lock ensures valuable income security for pensioners, but its long-term future is a topic of discussion. The consistent above-inflation increases contribute to a growing state pension bill. With an ongoing review of the state pension age, the government may explore options to ensure the system’s sustainability for future generations.
People Also Ask: Your State Pension Questions Answered
Q: How much will the state pension be in 2027?
A: While exact figures are confirmed closer to the time, based on current data and the triple lock, the full new state pension is projected to rise to approximately £241.05 per week in April 2027, up from £230.25.
Q: What is the triple lock on pensions?
A: The triple lock is a government policy that guarantees the state pension will increase each year by the highest of three measures: average earnings growth, the rate of inflation (CPI), or 2.5%. Its purpose is to protect pensioners’ purchasing power.
Q: Do pensioners pay tax on their state pension?
A: Yes, the state pension is classified as taxable income. If your total annual income, including your state pension and any other sources (like a private pension or earnings), exceeds your Personal Allowance (£12,570), you will be required to pay income tax.
Q: Is the triple lock guaranteed after 2027?
A: The current government has committed to the triple lock for the duration of this Parliament. Decisions about its continuation beyond that point will fall to the government elected in the next general election.