State Pension and the Triple Lock

Published: 18/09/2023 By Mackenzie Street

The state pension could rise by 8.5% following the publication of the latest average earnings figures. 

In the UK, we operate our State Pension under a ‘triple lock’ agreement. This means that the State Pension will increase annually based on whichever of the following options yields the highest outcome:
  1. Inflation 
  1. Average earnings growth 
  1. 2.5% 
Figures from 12 September 2023 show annual average earnings grew by 8.5% compared to the latest inflation figures of 6.8%. This means that annual average earnings will likely be used to determine the State Pension increase;  usually confirmed by the Government in November and implemented the following April. As a result, those in receipt of the Full State Pension could see an increase of 8.5% from £10,600 per annum to £11,501 per annum.

Whilst this significant increase in State Pension will be welcomed by its recipients, it is estimated to drag an additional 650,000 pensioners into paying income tax. This provides scope for tax-paying pensioners to seek professional financial advice and explore the methods of mitigating their tax bill.
To speak with one of our financial advisers about the implications of the increasing State Pension on your personal circumstance, get in touch here.

This article is based on our understanding of current tax legislation. Levels of taxation will depend upon individual circumstances and may be subject to change in the future.