Any further rise could drag millions of retirees into the tax net, raising questions about the long-term sustainability of the triple lock.
State pensioners have been warned the Triple Lock could be under threat as they are dragged closer and closer to breaching a HMRC threshold.
At present, the full new state pension pays £230.25 a week, or £11,973 per year – just £600 short of the point where income tax kicks in. Any further rise could drag millions of retirees into the tax net, raising questions about the long-term sustainability of the triple lock.
Matthew Parden, financial planner at Marygold & Co, said: “The potential for the full new state pension to generate a tax bill from next year as it uses up the personal allowance, could affect the future of the triple lock.
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“As state pensions rise under it, more pensioners are being pushed into the tax net, especially those receiving the full new state pension.”
Mr Parden added: “The combination of higher pensions and frozen tax thresholds may make the current formula unsustainable, prompting calls for reforms to balance fairness, affordability, and pensioner needs.”
Dr Christopher Massey, principal lecturer in modern British history and politics at Teesside University, said: “The overall cost of state pensions might cause the Government to change the triple lock itself. In an economy which is barely growing and with a tax bill which is at the highest level since the 1940s, the costs of the triple lock could soon become unsustainable.”
Mr Parden said: “Any change would need to carefully balance protecting pensioners with maintaining fiscal responsibility.” The Triple Lock is a UK government policy that ensures the State Pension increases each year to keep up with the cost of living. It’s designed to protect pensioners’ income in real terms over time.
Under the Triple Lock, the State Pension rises each April by the highest of three measures: average wage growth, inflation of 2.5 per cent. For example, if wages grew by 6%, inflation was 5%, and 2.5% was the floor, the State Pension would rise by 6%.
The policy has been a political and financial flashpoint, especially during times of high wage or inflation spikes, as it can significantly increase government spending.
