New figures released on Wednesday by the Office for National Statistics (ONS) show UK inflation remained flat at 2.0 per cent in June. The Consumer Price Index (CPI) inflation rate has remained at the Bank of England’s target level for the second month in a row.
Almost 12.7 million state pensioners in the UK, including more than one million living in Scotland, should keep a close eye on the CPI as it forms part of the Triple Lock measures which determine the annual increase in the benefit allowance.
Under the Triple Lock policy – which the Labor government has committed to for the next five years – new and basic state pensions increase each year in line with the highest of the average annual earnings growth from May to July, the CPI in the year to September , i.e. 2.5 percent.
Annual earnings growth (including bonuses) was 5.9 per cent between February and April, meaning it is currently the highest in the Triple Lock and the main driver of annual State Pension increases for 2025/26.
However, it is important to note that the earnings growth figure used for Triple Lock will be published by the ONS on August 13 but as it stands, it looks like it’s a key factor.
This means state pensioners in the UK could receive up to £234.45 every week or £937.80 every four-week pay period next financial year.
The amount of the State Pension depends on the number of qualifying years of National Insurance accumulated before retirement. Some people working in the public sector may need more than the average 35 years because they are contracted by their employer – find out more here.
State pension increase forecasts for 2025/26
New and basic state pensions rose by 8.5 per cent in April – as part of the Triple Lock measure of earnings growth. This means someone on the full new state pension will receive £221.20 each week, or £884.80 each four-week pay period during the 2024/25 financial year.
Those on the full basic state pension receive £169.50 each week or £678 every four week pay period.
A 5.9 per cent increase in the current state pension would mean people would receive:
- Full New State Pension – £234.45 weekly, £937.80 every 4 week pay period, £12,191.40 for the 2025/26 financial year
- Full Basic State Pension – £179.65 each week, £718.60 every 4 week pay period, £9,341.80 for the 2025/26 financial year
Note that these calculations are based on current ONS data. What to watch out for is the May-July profit growth figure, which will be released on August 13.
It is also important to note that additional State Pension payments and deferred State Pensions rise each year according to September’s CPI. The UK government usually confirms the annual increase during the Autumn Statement.
Latest State Pension news
Frozen state pensions
While the annual increase is welcomed by more than 12 million people at home and abroad, around 453,000 pensioners are waiting for a pay rise because they now live in a country that does not have a reciprocity agreement with the UK.
Retired expats in the European Economic Area (EEA) will continue to receive annual increases in their state pensions under the Triple Lock, as will those in a number of other countries including the Philippines and Turkey.
The International Consortium of British Pensioners advocates on behalf of expats affected by ‘freeze pensions’ and is behind the ‘End Freeze Pensions’ campaign, which aims to ‘end the injustice’ for Britons who have moved abroad whose state pension will not increase. line with Triple Lock every April.
Britons now living in Australia, New Zealand, Canada, South Africa, Antigua, Malaysia and Thailand have had their state pension frozen from the moment they emigrated – despite having worked and lived in the UK for most of their lives.
The End Frozen Pensions campaign explained: “They have moved, often to be near family, to live in one of the countries without mutual agreement with inflation linked to their state pension, so their pension is ‘frozen’ at the level they left United Kingdom.
“Those in countries with reciprocal agreements are not affected, so if you were retired in the US you would still get paid more, but if you lived just over the border in Canada, you wouldn’t.
“We believe it is deeply unfair and arbitrary and penalizes hard-working British people.”
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State pension and taxes
The latest figures from HM Revenue and Customs (HMRC) show that 8.1 million (64%) pensioners are currently paying tax, mainly due to additional income from a work or private pension to their state pension.
The full new state pension is worth £11,502 for the 2024/25 financial year, leaving just £1,068 before the personal tax threshold is exceeded, so anyone with an extra income of £89 or more a month – on top of their state pension – can receive a tax receipt in the following year.
Someone on the full rate of basic state pension will get £8,814 this year. This leaves just £3,756 before the personal tax threshold is exceeded, which equates to an additional income of £313 a month in total.
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