In a welcome move for retirees, the new government has confirmed the State Pension Triple Lock is here to stay for the current parliamentary term. This commitment ensures pension incomes will be protected against rising living costs, at least for now.
However, financial experts are sounding the alarm about a looming side-effect: a stealth tax rise that will see a record number of pensioners paying income tax on their state pension.
What is the Triple Lock Promise?
The Triple Lock is a government pledge designed to protect the purchasing power of the state pension. Each year, it increases by the highest of three figures:
Earnings Growth: The average percentage growth in wages (measured from May to July).
Inflation: The Consumer Price Index (CPI) rate in September.
2.5%: A minimum guaranteed increase.
This mechanism ensures pension rises aren’t left behind, whether wages are booming or prices are soaring.
The Government’s Stance: A Short-Term Guarantee
Pat McFadden, the new Labour Cabinet Minister responsible for the Department for Work and Pensions (DWP), officially confirmed the government’s commitment to maintaining the Triple Lock for this Parliament.
This provides immediate certainty for millions of retirees. As David Brooks, head of policy at Broadstone, noted, the debate is often framed as “triple lock or nothing,” but the principle of the state pension keeping pace with the cost of living is widely seen as fair.
The Hidden Challenge: The Frozen Tax Threshold
While the Triple Lock protects your pension’s value, a separate government policy is quietly eroding its net worth. The personal tax allowance—the amount you can earn before you start paying income tax—has been frozen until at least 2028.
This creates a fiscal pincer movement. As your pension increases yearly thanks to the Triple Lock, it moves closer to the static tax threshold, pulling more people into the tax net.
Steve Webb, former Pensions Minister and partner at LCP, issued a stark warning: “The annual standard rate of the new state pension is creeping ever closer to the frozen personal tax allowance. Indeed, 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 that even those who rely solely on the state pension will soon be paying income tax on a portion of it—a significant shift in the UK’s tax landscape for retirees.
What This Means For You
The confirmation of the Triple Lock is positive news and means pensioners can expect a meaningful income increase this coming April.
However, it’s crucial to be aware of the broader picture:
You may start paying income tax: If you aren’t already, rising pension amounts could push your income over the frozen £12,570 tax threshold.
Your tax bill may increase: If you are already a taxpayer, a larger pension income could push you into a higher tax bracket.
Planning for this now is essential to avoid any nasty surprises down the line.
Answers to “People Also Ask” Questions (Google Featured Snippet Style):
Q: Is the Triple Lock on pensions being scrapped?
A: No, not immediately. The current government has committed to keeping the Triple Lock pledge for the entire duration of this Parliament. However, experts predict intense debate about its long-term future beyond that.
Q: How does the UK State Pension Triple Lock work?
A: The Triple Lock guarantees the state pension will increase each year by the highest of three figures: average earnings growth, the Consumer Price Index (CPI) inflation rate, or 2.5%. This ensures pensioner incomes are protected.
Q: Will I have to pay tax on my state pension?
A: Quite possibly. The personal tax allowance is frozen at £12,570 until 2028. As the state pension increases annually (due to the Triple Lock), it is forecast to exceed this threshold by April 2027. This means even those with only a state pension will become taxpayers.
Q: What is the new State Pension amount?
A: The amount changes each April. For the 2024/25 tax year, the full new State Pension is £221.20 per week. The exact amount you receive depends on your National Insurance contribution history.
Q: Why are more pensioners paying income tax?
A: This is due to two conflicting policies: the Triple Lock (which increases pensions) and the freeze on income tax thresholds. As pensions get larger but the tax-free allowance stays the same, more people exceed the threshold and become liable for income tax.