- Wednesday’s (22 October) CPI inflation figure from the Office for National Statistics (ONS) is set to provide clarity on what the state pension will be from April 2026
- Revised ONS figures released last week showed 4.8% earnings growth including bonuses for May to July 2025
- The triple lock guarantee means the state pension will rise by the highest of average earnings growth, inflation or 2.5%
- If CPI inflation comes in lower than 4.8%, as is currently expected*:
- The full ‘new’ state pension should increase from £230.25 per week (around £11,973 per year) to £241.30 per week (around £12,548 per year) in April 2026
- The ‘old’ state pension should increase from £176.45 per week (around £9,175 per year) to £184.90 per week (around £9,615 per year)
- Assuming the personal allowance remains frozen, the full state pension will exceed the personal allowance of £12,570 by 2027/28 if the benefit increases by the minimum 2.5% under the triple lock
- The government revived the Pensions Commission earlier this year to review all aspects of the UK’s pension system, possibly including the state pension
Rachel Vahey, head of public policy at AJ Bell, comments:
“Pensioners are set to see their state pension rise by an inflation-busting 4.8% from next April, with September’s CPI inflation figure expected to come in below the revised wage growth figure for the three months to July when the figures are released by the ONS on Wednesday.
“Under the triple lock guarantee, the state pension will rise by the highest of average earnings growth in May to July, September’s inflation figure or 2.5%. Provided September’s inflation figure doesn’t spike above 4.8%, all stars point to a boost for the new state pension to around £12,548 from April 2026 – putting it above £12,000 for the first time and within inches of the frozen personal allowance.
“This poses a significant conundrum for Rachel Reeves and the Treasury. If, as is expected short of a policy intervention, the triple lock sees the state pension increase above the personal allowance of £12,570 in April 2027, then the government will come under increasing pressure to either unfreeze the personal allowance or consider whether it can stand behind its promise to sustain the triple lock for the rest of this Parliament.
“Removing the freeze on the personal allowance would come at significant cost to the Treasury at a time when the chancellor’s fiscal headroom is already strained at best, while an overhaul of the triple lock would come with huge political risk before the next general election. Needless to say, it’s a headache Starmer and Reeves could do without ahead of a crucial Budget in November with economic and political pressure building both within the Labour Party and outside of it.”
Source: AJ Bell, HMRC*.
Source: AJ Bell, HMRC.
The Pensions Commission and the future of the triple lock
“In July, the government revived the Pensions Commission as part of a long-term plan to address the pension under-saving crisis of those due to retire in the mid-century. As part of this, the commission will look at the relative success of automatic enrolment, contribution rates among employers and workers and solutions for the self-employed.
“But the commission also promises to look at the balance between all types of pensions, and that could mean a review of the state pension as well, at the same time as the government undertakes its formal review of the state pension age.
“The state pension age will gradually increase to age 67 between 2026 and 2028. It’s also due to rise to 68 in the mid-2040s. The latest state pension age review will look at whether the current rules for setting when people can start receiving their state pension still make sense, given new information on life expectancy and other important factors. A new framework of rules could hasten conversations whether to bring forward an increase in the state pension age to the late 2030s to save future governments money.
“Pensions minister Torsten Bell recently ruled out scrapping the triple lock guarantee, but as the state pension grows ever closer to the frozen personal allowance threshold it could be that the government is finally 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.”
*Annual figures based on weekly state pension multiplied by 52 to provide a rough estimate.
