STATE PENSION RISE MAY PUSH PENSIONERS INTO PAYING TAX

The state pension looks set to rise by 3.9% from next April under the triple lock guarantee, following the latest earnings figures published by the Office for National Statistics. The triple lock increases the state pension each year by whichever is highest of average earnings growth, inflation or 2.5%. Average wage growth, including bonuses, between May and July came in at 3.9%, the ONS said. Unless September's inflation figure comes in higher, that wage figure is expected to be used to set next year's increase. If applied, the rise would push the full new state pension above the £12,570 income tax personal allowance, meaning pensioners would pay tax on it for the first time.

Under the projected rise, the flat-rate state pension, paid to those who reached state pension age after April 2016, would increase to £250.70 a week, or £13,036.40 a year, a rise of £488, according to calculations based on the ONS data; one report put the new annual figure at just above £13,000. The older basic state pension, for those who reached state pension age before April 2016, would rise by £374.40 to £192.10 a week, or £9,989.20 a year. Almost 13 million people receive the state pension in the UK, according to the ONS. The income tax personal allowance has been frozen at £12,570, meaning more people are drawn into paying tax as incomes rise. Inflation currently stands at 2.9% and is expected to rise in the coming months.

The rise will not be confirmed until September's inflation figure is published next month; if that figure exceeds 3.9%, it will be used instead, and the wages figure may also be revised. The Labour government has previously pledged that pensioners whose only income is the full new or basic state pension would not be required to complete a tax return or be chased for payment, though further detail has not been provided. The triple lock was introduced by David Cameron's Conservative government in the 2011-12 financial year. The British Chambers of Commerce last week called for the triple lock to be replaced with an annual increase linked to inflation, with any savings redirected elsewhere. Projections suggest pensioners could begin paying income tax on the state pension itself from 2027, according to current forecasts.