The state pension has increased by 10.1 percent as the triple lock has made its return this year. The triple lock ensures the state pension rises each year by whichever is the highest of 2.5 percent, inflation or average earnings.
As such, in line with September 2022’s CPI inflation figure, a 10.1 percent record boost has been delivered.
However, this means there are tax implications Britons may have to bear in mind going forward.
What are the new rates for the state pension?
The full new state pension has risen from £185.15 to £203.85 per week.
The full basic state pension has risen from £141.85 to £156.20 per week.
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Pension Credit rates have also increased this year, helping low income pensioners.
Single people will see their income topped up to £201.05 weekly.
Couples will get an income top up to £306.85 per week.
The full state pension rise now works out at approximately £10,600 per year for those who are eligible.
This increase means retirees who qualify for the full amount will receive an extra £1,000 (before tax) than they did last year.
However, it is the tax implications that some pensioners will have to carefully bear in mind.
Dean Butler, managing director for customer at Standard Life, said: “Pensioners are set to see a healthy boost to their incomes in a few days’ time as the state pension amount passes £10,000 for many for the first time.
“However, given the substantial state pension boost, it’s important to be aware of the implications this has in relation to the personal allowance which isn’t due to increase until April 2028.
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Even though tax is not deducted from the state pension, it will use up some of a person’s tax-free allowance.
As the personal allowance has been frozen in this tax year, in the form of a “stealth tax”, it means the state pension increase will take up more of the tax-free amount.
As the new rate “trickles through into pensioners’ pockets” in the coming weeks, investment platform AJ Bell has said the triple lock is likely to remain a key topic of conversation going forward.
The platform stated: “A manifesto commitment at the last general election, the future of the triple lock is likely to remain a topic for debate as we approach another election next year.”
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