Many older Britons will be delighted by the news their state pension will rise from today (April 6, 2023) onwards. The 10.1 percent boost to payments represents the largest ever increase to the state pension, and comes after a temporary one-year suspension of the triple lock.
State pension 2023/24 rates
The full new state pension will rise from £185.15 to £203.85 weekly. Some may get less if they were contracted out before April 6, 2016.
The old, basic state pension will rise from £141.85 to £156.20 per week.
The married woman’s, or Category B, basic state pension will increase from £85.00 to £93.60 a week.
Finally, the Category C or D non-contributory state pension will also increase from a weekly payout of £85.00 to £93.60.
A number of experts have weighed in on what today’s state pension changes could mean.
Steven Cameron, pensions director at Aegon, said: “Those receiving the state pension are in for a double digit boost from today. Under the triple lock, they will receive an increase of 10.1 percent.
“This means those entitled to the full new state pension will see the yearly amount rise from £9,628 to £10,600.
“Those on the full old state pension get the same percentage increase. This takes them from £7,376 to £8,122 a year.”
However, while this is the highest increase ever in the state pension, high inflation means older people may still find their finances challenging.
The latest data shows inflation is running at 10.4 percent, meaning even with a bumper boost, the state pension still falls behind inflation.
Inflation is forecast to come down in the coming months, but is still expected to be relatively high in September – the month the inflation and wage data is drawn from to determine the state pension the following April.
So, what could this mean for state pension payments going forward?
Becky O’Connor, director of public affairs at PensionBee, said this year’s increase is likely to be a “huge relief” for pensioners, but there are implications for next year.
She explained: “We could see a rise in the state pension next year of around four or five percent, based on OBR inflation forecasts. This is still higher than the long run average of between 2.5 percent and three percent a year.
“In an environment of rapidly falling inflation, such increases may be harder to justify for a Government trying to make the state pension affordable in the long term.”
READ MORE: Santander offers market-leading interest rate on fixed cash ISA
If inflation cools, the short-term commitments to the triple lock mechanism are likely to be easier.
However, Catherine Foot, director of Phoenix Insights, warned “serious questions” remain about the long-term funding challenges of the state pension.
She said: “Costs are set to balloon in the coming decades as our younger wave of baby boomers (those born in the early 1960s) reach state pension age and live longer in retirement.
“The state pension has become a political hot potato with decisions delayed until after the next election. Even with a future commitment to the triple lock, relying solely on the state pension will leave people short of a decent standard of living in retirement.”
As a result, she urged people to save as much as possible, and plan towards the end of their careers.
However, with the state pension rising, experts have also warned Britons to look out for potential tax implications.
Dean Butler, managing director for customer at Standard Life, added: “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.
“The personal allowance has remained flat in recent years and will gradually be bringing more and more people into the tax system as result.”
With the threshold for paying income tax frozen at £12,570, the full new state pension is now not far behind.
Consequently, some state pensioners with a modest income, for example from a private or workplace pension, could find they are now subject to tax on the amount which exceeds £12,570.
For those affected, Mr Butler recommended Britons make sure they are not taking bigger lump sums from their pension on which they might pay tax if this can be avoided.
However, before making any decisions on one’s pension, Britons are generally encouraged to seek independent advice.
