The government has confirmed that the state pension will rise by 4.8 per cent under the triple lock, raising further questions over the potential impact of a continued freeze on the personal allowance and the rising cost of the state pension.

Chancellor, Rachel Reeves, is expected to confirm the news as part of her Budget this week, with around 13 million pensioners set to benefit from an above-inflation increase as a result.

Under the triple lock, the rate of the full new state pension will increase to just over £240 a week from next April, while the full basic state pension is expected to rise by around an extra £440 a year. 

This is an increase worth over £550 a year, an extra £120 compared to what it would have been if it had been uprated only by inflation.

Commenting on the news, Reeves said: “Whether it's our commitment to the triple lock or to rebuilding our NHS to cut waiting lists, we're supporting pensioners to give them the security in retirement they deserve. 

“At the Budget this week I will set out how we will take the fair choices to deliver on the country's priorities to cut NHS waiting lists, cut national debt and cut the cost of living.”

Aegon pensions director, Steven Cameron, said that the news marks "welcome confirmation", noting that whilst this was a Manifesto Commitment, there were real concerns that the Chancellor might have reneged on this, instead focusing on ‘working people’.

However, Cameron clarified that, while welcome, the increase does come with a "sting in the tail for future years".

"Under the triple lock, the full state pension will increase by a minimum of 2.5 per cent in future years, meaning in 2027/28 it will be at least £12,861," he stated. 

"This is above the personal allowance of £12,570, which is already frozen until April 2028, with speculation of an extended freeze until 2030. This means someone whose sole income is the full new state pension will face a tax charge on the excess, a minimum of £58 a year – something many will see as a case of giving with one hand and taking with the other.
 
“Currently, there is no facility to deduct tax direct from state pensions, with income tax on overall retirement incomes being deducted from private and workplace pensions.

"So those with solely a state pension could face receiving letters from the taxman demanding they pay the tax due. While of modest amounts, this could create anxiety amongst many vulnerable pensioners."

Indeed, modelling from LCP partner, Steve Webb, has raised concerns over the potential impact of a continued freeze on personal allowances, a move that the Liberal Democrats had previously branded as a "stealth tax" on pensioners.
 
Given this, Cameron urged the government to be clear with affected state pensioners if they can expect to receive tax bills in future years.
 
This is not the only concern, as Broadstone head of policy, David Brooks, argued that the outsized increase to the state pension will once more raise questions around the long-term viability of the triple lock, given the accelerating cost to the Exchequer. 

"With the state pension age review ongoing, it will be interesting to see if it makes any proposals beyond raising the age of receipt either higher or faster," he stated. 
 
“As we head into Winter with the cost-of-living pressures still biting, the news will be reassuring for those pensioners who are largely reliant on the state pension to provide the majority of their income.”

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