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In April, individuals who are starting to receive their new state pension may notice an increase of over £500 annually, according to the latest wage data. The state pension increases each year based on the highest figure among 2.5%, inflation, or average earnings growth, known as the “triple lock” policy. The Office for National Statistics (ONS) reported that total pay including bonuses rose by 4.7% for the three months leading up to July, providing an estimate for the upcoming annual increase. Currently, nearly 13 million individuals are beneficiaries of the state pension. The triple lock approach was implemented by the Coalition government back in 2011.
The most recent wage statistics from ONS indicate that the new flat-rate state pension, applicable to those who reached state pension age after April 2016, is anticipated to climb to £241.05 per week, equating to £12,534.60 yearly – an upsurge of £561.60 from the present amount. For those who met state pension age prior to April 2016, the old basic state pension is likely to elevate to £184.75 a week, translating to £9,607 annually – a hike of £431.60 compared to the current level. With a forecast of 4% inflation in September, it is anticipated that the growth figure for average earnings on Tuesday will be utilized to establish the state pension increase.
Steve Webb, partner at pension consulting firm LCP and former pensions minister, expressed concern that the standard rate of the new state pension is inching closer to the fixed personal tax allowance amount of £12,570, scheduled to remain unchanged until 2028. Webb noted that if an individual’s sole income is the new state pension, they are likely to become taxpayers by April 2027 alongside the majority of pensioners who currently pay income tax. The continued freezing of tax thresholds coupled with regular pension increases could push more retirees into the tax bracket.
Linda, a retired hairdresser from Wokingham, emphasized the impact of her state pension nearing the tax threshold, mentioning how any increases were offset by taxes. She highlighted the significance of raising the tax threshold to positively impact her state pension income. The concern of managing on the state pension alone was raised by Linda, underscoring the reliance on her husband’s pension for a comfortable lifestyle. ONS data showed a decrease in regular wage growth to 4.8% in the three months leading to July, marking the lowest rate since May 2022. While the ONS noted the decline in cash terms, KPMG’s chief economist, Yael Selfin, forecasted a continued decrease in earnings growth over the upcoming year due to economic constraints leading to reduced demand for workers and increased labor costs
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