If this increase is applied as expected, current pension payments would go up by £6.95 a week for those claiming the Basic State Pension and £9.10 a week for anyone who reached state pension age after April 2016 and is on the New State Pension. This translates to an annual increase of £361.40 for the Basic State Pension – bringing the yearly total to £9,175.40 – and £473.20 a year for the New State Pension, which brings its total to £11,975.60 a year.
Why is the State Pension going up?
State Pension increases are decided by the triple lock system. It ensures that pensioners – especially pensioners with limited other income – are protected against rising prices. The triple lock system also ensures the income that pensioners receive keeps up with the wage growth of workers.
The system requires payments to increase by the higher of 2.5%, the CPI (Consumer Price Index) rate of inflation or wage growth. The CPI figure is taken from the September before the increase is due, while the wage growth figure is for the three months to July. Read our article ‘What is the State Pension triple lock?’ for more details on how the system works.
The relevant inflation figure for the April 2025 calculation was announced by the ONS this October. However, it was far less than the wage growth figure at just 1.7%.
Keep in mind that the government is able to change the details of the triple lock, or even suspend it entirely. For example, in 2021 it was decided that wage growth figures were too high at 8.8% – partly due to the withdrawal of furlough payments – so the CPI rate of 3.1% was used instead. This can be done because the triple lock is a government commitment that it is not legally bound to stick to, rather than an act of parliament that is enshrined in law.
What is the effect of the State Pension increase?
The basic consequence of this potential increase is that UK pensioners will have more money in their pockets. It means that they will be better protected against the rising cost of fuel and goods. However, the likely increase to the New State Pension will mean it rises to almost £12,000 a year. This is unlikely to be a sustainable income for many pensioners, especially those facing higher living costs. The State Pension for most retirees is used as a top-up, rather than a sole source of income. We cover the importance of private pensions in our article ‘What is a private pension?’.
Many pensioners will also find themselves much closer to having to pay income tax, or needing to pay more if they already do. £11,975.60 is close to the basic personal allowance of £12,570, so while the increase is likely to be a significant cost to the treasury, some of that money will be returned in tax from pensioners with additional sources of income, as it will take them over the personal allowance.
Will the State Pension rise again in future?
The State Pension remains one of the Treasury's most expensive costs and the largest form of welfare spending in the UK. The OBR (Office for Budget Responsibility) calculated in March 2023 that State Pension costs would hit £135 billion in the 2024/25 tax year and £147 billion by 2027/28. Some analysts have suggested that this increase is unsustainable and the triple lock should be axed.
In our article ‘What is the State Pension triple lock?’ we show how the triple lock has left State Pension payments significantly higher than if a single measurement had been used instead. State Pension increases are a regular topic for political debate and will likely continue to be in the coming years. This could result in regular alterations to the triple lock calculation, a complete overhaul of how the State Pension works or even the triple lock becoming a fixed commitment enshrined in law. The direction of travel will depend on the political landscape, which is very difficult to predict.
In the meantime, you can find out if you will be able to claim a State Pension by reading our article ‘Will I get a state pension?’.
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