State pensioners are bracing for two major shifts from April 2026 that will affect their payouts.
The full new state pension is currently pegged at £230.25 weekly, or £11,973 annually, while the full basic sum is £176.45 a week, or £9,175.40 per year.
Alterations to the state pension are looming and could impact millions of retirees. From next year, the state pension age will incrementally increase from 66 to 67, affecting those born between April 6, 1960, and May 5, 1960, who will see their retirement delayed by a month.
This adjustment will proceed in stages until 2028, with the complete rise to 67 anticipated by then. However, there’s another twist: the full new state pension is approaching the £12,570 personal allowance threshold, which could lead to unforeseen tax consequences for some pensioners.
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While the triple lock policy ensures an annual increase, these changes in eligibility and taxation could diminish the amount pensioners receive.
Looking further into the future, the state pension age will continue its upward trajectory, with plans to ascend from 67 to 68 between 2044 and 2046.
This gradual shift raises serious concerns about the future of retirement for UK workers.
Losing just half a year of state pension payments due to a hike in the state pension age could cost pensioners around £5,980, based on the full new state pension rate.
The financial blow will be even more significant when considering next April’s triple lock increase. The triple lock guarantees that state pensions rise each year by.
The greater of 2.5 per cent, average earnings or inflation will be the increase. This implies that pensioners may face a more significant loss than current estimates indicate.
Those planning their retirement should consider these changes when projecting their future income.
Another worry for those depending on the state pension is the potential tax implications from next year. The full new state pension is expected to be £11,973 annually, which is only around £600 below the personal allowance limit of £12,570.
Once this limit is surpassed, income tax becomes due.
A modest five per cent rise in the state pension would push recipients over that limit. With average earnings currently at 5.6 per cent, the highest of the three triple lock measures, such an increase seems increasingly probable.
This could result in many pensioners paying income tax solely on their state pension income.
Labour was recently asked if it would contemplate increasing the personal allowance for state pensioners to avoid taxation solely on state pension income.
