Good news for pensioners is coming at the start of the new financial year. Beginning in April 2025, the state pension will increase, giving pensioners more money and easing their financial burdens. In this article, we will explore the details of the state pension increase, the amount pensioners can expect to receive, and how it will affect the Income Tax Threshold.
How much more will be received in the state pension?
From April 2025, the state pension will increase by 4.1%, which is in line with the average salary increase in the previous financial year. This means that pensioners will get more money to deal with their living expenses.
- For those who have reached the state pension age after April 2016, the new state pension will be £230.25 per week, up from £221.20. This amount is equivalent to about £998.59 per month.
- People who reached state pension age before April 2016 and receive a basic state pension will see their weekly pension rise by £176.45 to £169.50, equivalent to £762.78 per month.
The increase is part of the Government’s efforts to ensure pensioners have a fair and adequate income, particularly for those who have had a break in their National Insurance contributions, such as parents who took a career break to look after children.
When will I receive my state pension?
Your state pension will be determined by the last two digits of your National Insurance number. The timescales for pension payments will be as follows:
- 00 to 19: Pension will be paid on Monday.
- 20 to 39: Pension will be paid on Tuesday.
- 40 to 59: Pension will be paid on Wednesday.
- 60 to 79: Pension will be paid on Thursday.
- 80 to 99: Pensions will be paid on Fridays.
This payment schedule makes it easier for pensioners to manage their monthly expenses.
What is the state pension triple lock?
The state pension’s “triple lock” is an important guarantee. It was introduced in 2011, ensuring that state pensions rise each year by the highest of three factors: inflation, the average wage increase, or 2.5%. The policy aims to give pensioners a stable income that can cope with rising inflation.
In 2024, the state pension will rise by 8.5%, in line with the inflation rate at the time. In April 2025 the increase will be 4.1%, in line with the 2024 wage increase.
Although this system has protected pensioners from inflation, some say the system is not sustainable in the long term. The cost of pension payments is rising rapidly, and the government’s pension spending is estimated to be £138 billion in 2024/25, which could reach £172.2 billion by 2028-2029.
Will my state pension be taxed?
Currently, your state pension is considered taxable income and may be subject to tax if your total income exceeds the income tax threshold. The state pension is taxable in the same way as other income.
The current income tax threshold is £12,570, and it has not been increased since 2021. While the increase in the state pension is welcome, for many pensioners the increase may not be entirely beneficial to them due to the income tax threshold remaining constant.
Dennis Reed, director of Silver Voyages, has raised this issue. He says many pensioners who receive a small private or occupational pension alongside their state pension are now subject to income tax. He also said that if the income tax threshold is not adjusted to inflation, more pensioners will be brought into the tax net in the future.
What is the solution to this problem?
Engineers like Dennis Reed have been campaigning for a reform of the income tax threshold. With the increase in the state pension, it is extremely important that the government consider raising the income tax threshold so that there is no additional burden on pensioners.
A spokesperson from the treasury assured that the government is committed to helping pensioners live a life with dignity and respect. He also said that under the government policy, a pensioner couple can get benefits of up to £88 per month, and the increase in the state pension is being done to ensure that pensioners are in a better financial position.
Conclusion: Will the increase in the state pension be enough for pensioners?
The increase in the state pension is a welcome relief for pensioners as it will help them cope with rising inflation and living costs. However, income tax thresholds remaining constant may reduce this increase for some pensioners, causing them to come into the tax bracket even if they only have a state pension.
The Government’s triple lock policy ensures that state pensions rise in line with inflation and pay raises, but the issue of income tax thresholds will need to be considered by the Government. Pensioners should be aware of these changes and plan their plans, taking into account any potential tax implications.
If you are a pensioner, it is important to understand how these changes may affect you, and you should seek professional advice to make the most of your pension benefits.
FAQs
Q. How much will the state pension increase in April 2025?
A. The state pension will rise by 4.1%, based on the average wage increase from the previous year.
Q. What is the new weekly amount for the full state pension after April 2025?
A. The full new state pension will increase to £230.25 per week, up from £221.20.
Q. When will my state pension be paid?
A. State pensions are paid according to your National Insurance number’s last two digits. Payments are made from Monday to Friday.
Q. What is the state pension triple lock?
A. The triple lock guarantees the state pension increases yearly based on inflation, wage growth, or 2.5%, whichever is highest.
Q. Will my state pension be taxed?
A. Yes, the state pension can be taxed if your total income exceeds the income tax threshold, which has been frozen at £12,570.
