State pension will rise 4.8% to £12,548 a year next April, Chancellor confirms

Pensioners will receive a 4.8 rise in the state pension from next April, the Chancellor confirmed in the Budget today.

The full flat rate will increase from £230.25 at present to £241.40 a week – or just under £12,548 a year – if you reached state pension age after April 2016.

People who retired before that on a full basic state pension will get a 4.8 per cent rise as well, from £176.45 to £184.90 a week

However, people on the basic rate also get hefty top-ups, called S2P or Serps, if those were earned earlier in life.

The confirmation of next year’s rise by Rachel Reeves keeps the Government’s pledge to raise the state pension according to the triple lock, which it says it plans to stick with for the whole of this parliament.

The popular guarantee means the state pension is increased by the highest of inflation, average earnings growth or 2.5 per cent.

Wage growth determined the triple lock rise this year, as CPI inflation came in at 3.8 per cent in the relevant month.

State pension: Headline full flat rate will increase from £230.25 at present to £241.40 a week

But not all elements of the state pension are increased according to the triple lock.

Various key parts of it, which can come into play depending on your age, marital status, National Insurance record and whether you deferred your state pension, will be increased in line with 3.8 per cent inflation instead. We have a rundown of how this worked for April 2025’s state pension increase here.

Meanwhile, the full flat-rate state pension is now nudging the threshold where people start being stung for income tax, which is £12,570 – and is set to be frozen until at least 2030/31.

Former Pensions Minister Steve Webb, a partner at LCP, has estimated that ten million pensioners could be paying income tax by end of the decade as a result, up from 8.7million now.

Many pensioners already earn over the £12,570 personal allowance, landing them with an income tax bill if they have a private pension too, or if they earned state pension top-ups during their working life or delayed taking the payments at state retirement age.

The Government says it is going to explore ways to avoid pensioners whose sole income is the basic or new state pension having to pay a small amount of tax, should it start exceeding the personal allowance from 2027/28.

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The Government also announced today it is launching a review of the state pension top-ups system.

People who don’t have a full state pension record – with 35 years required to get the full amount – can make voluntary National Insurance contributions to boost their payouts.

The Government also intends to close loopholes allowing people to make contributions at a cheaper rate while living overseas, and to increase the initial residency requirement for buying them to 10 years.

Steven Cameron, pensions director at Aegon, says while triple lock increases in the state pension were a manifesto commitment, there were real concerns that the Chancellor might have reneged on this, instead focusing on ‘working people’.

‘While welcome, the increase does come with a sting in the tail for future years. Under the triple lock, the full state pension will increase by a minimum of 2.5 per cent in future years, meaning in 2027/28 it will be at least £12,861. 

‘This is above the personal allowance of £12,570.’

Lucie Spencer, partner in financial planning at Evelyn Partners, says: ‘The triple lock headlines disguise a wide range of circumstances for today’s pensioners. For a start, only one in three pensioners get the full new state pension.

‘The reality is that pensioners receive not “the state pension” but a dizzying array of different payouts depending on when they reached state pension age, whether they had opted out of the old system, and whether they had accumulated enough National Insurance contributions (35 years contributions if you retire after 6th April 2016), to name just a few of the variables.’

David Brooks, head of policy at consultancy Broadstone, says: ‘Confirmation that the state pension will increase by 4.8 per cent, around £575 a year for those on the full new state pension, takes the annual benefit right up to the brink of the frozen personal allowance threshold and will drag more retirees into paying income tax next year.

‘The outsized increase to the state pension will once more raise questions around the long-term viability of the triple lock given the accelerating cost to the Exchequer.’