State pension payments in the UK are set to increase next month but analysts are sounding the alarm that the Labour Government “will be forced to answer questions” about the triple lock and retirement age.
From April 2025, the full new state pension will rise from £221.20 to £230.30 per week which represents a weekly boost of £9.10 for pensioners receiving the new state pension.
Furthermore, those on the basic state pension will also see an increase, with payments rising from £169.50 to £176.45 per week.
The annual increase means pensioners will receive nearly £500 more over the course of a year, with the total rising from £11,541.90 to £12,016.75.
State pension payments are to rise next month but for how much longer remains to be seen
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This represents an annual increase of £474.85 for those on the full new state pension but concerns have been raised about the long-term viability of the retirement benefit.
Rachel Vahey, the head of public policy at AJ Bell, noted that UK pensioners “should see a sizeable increase to their state pension, of almost £500 a year, to bring the full new state pension to just under £12,000 from April”.
The payment rate increase is part of the Government’s triple lock promise, which makes sure state pensions rise annually.
This guarantee means payments increase by either inflation (based on the previous September’s figure), wage growth (average increase between May and July), or 2.5 per cent; whichever is highest.
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The Government hopes this rise will “publicly reinforce its commitment to the triple-lock guarantee,” according to Vahey.
However, while pension payments are set to rise, the age at which Britons can claim their state pension is also increasing from next year.
The state pension age will gradually rise from 66 to 67 starting in 2026, with the transition expected to be completed by March 2028.
This planned change to the official retirement age has been on the books since the Pensions Act 2014. The DWP will contact all those affected by the rise in the coming months.
Vahey has raised concerns about the Winter Fuel Payment cuts, stating: “Criticism of the decision to scrap the Winter Fuel Payment for all pensioners except those that receive Pension Credit still lingers.”
She noted that while Pension Credit claims have increased, “many others will still be reeling from the £200 most pensioners lost this winter.”
The pension age increase will affect those born between March 6, 1961, and April 5, 1977, who will need to wait until they reach 67 to claim their state pension.
This means they will need to work one year longer than those born earlier. Under the current system, both men and women are eligible to claim their state pension at 66.
The state pension age last increased in December 2018, when it began rising from 65 to 66, completing in October 2020.
Future reviews of the state pension age could lead to further increases, with the 2022 review suggesting a gradual rise to 68 between 2041 and 2043.
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The same review even proposed the possibility of an increase to 69 between 2046 and 2048.The Pensions Act requires a regular review of the state pension age every five years.
These reviews typically result in recommendations that the government can accept, reject, or provide feedback on. Vahey warns of a looming tension between rising pension payments and frozen tax thresholds.
“The state pension will be at a level perilously close to the personal allowance and should overtake it in a couple of years if things continue, thanks to frozen tax thresholds,” she explained.
This creates a potential “crunch time” for the Government, as the state pension amount approaches the tax-free personal allowance threshold.
“It could be that this fast-approaching crunch time means the government will finally be forced to address the question of how much the state pension should really offer, at what age, and how it can increase payments sustainably each year,” Vahey added.
