July’s earnings figure of 3.9 percent will be used to uprate the state pension under the triple lock guarantee, surpassing £13,000 for the first time ever.
While the state pension is set to exceed the personal allowance, the government has pledged that those living solely on the state pension above the allowance will not pay income tax on it.
The income tax personal allowance threshold has been frozen at £12,570 since April 2021.
Rachel Vahey, head of public policy at AJ Bell, stated that the triple lock boost will be welcomed by pensioners, but it comes with a warning: change is on the horizon.
Vahey noted that Prime Minister Andy Burnham announced plans to modify the triple lock from April 2030, so that the state pension will rise by the highest of inflation or 2.5 percent, with a further check against a smoothed average earnings growth measure.
Vahey added that moving to a smoothed average likely means pensioners in the future will miss out on the full increases in earnings, especially in the years when wages spike.
The government still needs to decide when to bring forward the move in the state pension age from 67 to 68, and if they want to make this change in the late 2030s, they will need to make the call soon to give people at least 10 years’ notice.
The state pension increase in April 2027 will be a welcome boost for many pensioners, but the future of the state pension system remains uncertain.
