State pension likely to rise by 3.9% next April

Next April, the state pension is expected to increase by £9.40 per week to £250.70, according to the most recent employment and pay data. This rise is determined by the highest figure among average wage growth, inflation, or 2.5%, whichever is greater. Average wage growth, encompassing bonuses, between May and July slowed to 3.9%, as reported by the Office for National Statistics.

There are nearly 13 million recipients of the state pension in the UK, and it is projected that pensioners will start paying income tax on it from 2027 for the first time. If the increase is indeed 3.9%, the flat-rate state pension would surpass the personal allowance of £12,570, making it subject to income tax.

The Labour government has previously guaranteed that pensioners relying solely on the state pension would not need to file a tax return or be pursued for payment. The average wages figure released by the ONS is likely to be the decisive factor in the state pension increase next April. The flat-rate state pension for those who reached state pension age after April 2016 will likely be £250.70 weekly, or £13,036.40 annually.

This represents an increase of £488 from the old basic state pension. The flat-rate state pension for those who reached state pension age before April 2016 will likely be £192.10 weekly, or £9,989.20 annually, an increase of £374.40. The rise in the state pension for next year will not be confirmed until September when inflation is released.

If inflation turns out to be higher than 3.9%, that figure will be utilized to calculate the increase. The wages figure might also be revised in a month's time. Currently, inflation stands at 2.9% and is anticipated to rise in the forthcoming months.