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The new full State Pension is set to increase by at least £561.60 a year from April 2026, following the publication of the latest average earnings figures, which reached 4.7% in May-July.
This would take the new full State Pension (for those reaching State Pension age after 2016) to £12,534 in the 2026/27 tax year, up from £11,973 in the current tax year. Someone on the full basic State Pension (for those who reached State Pension age before 2016) would see a lower increase, with their pension rising from £9,175 to £9,607 per year from next April.
The increase is down to the government’s ‘triple lock’ guarantee, which means pensions are guaranteed to rise by the highest of 2.5%, September’s inflation number, or May-July earnings numbers. Find out more in our article What is the pension triple lock?
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “State pensioners look on course to get a 4.7% uplift in their state pension next year as average wage growth remained robust. Such an increase would see a full new state pension rise from its current level of £230.25 per week to £241.05 per week from April. Those retiring on the basic state pension would see their weekly income increase from £176.45 per week to £184.75.
“However, the hike is not yet set in stone. We are awaiting the final piece of the triple lock puzzle – September’s inflation data to be published next month, and if this surpasses 4.7% then we could see an even bigger increase. However, given that inflation currently sits at 3.8% it seems likely that wage growth will be the key figure here.”
You can read more about how the State Pension works in our guide How the State Pension works.
Retirement incomes remain under strain
Despite the increase in the State Pension next year, anyone who is solely reliant on this in retirement is likely to struggle to make ends meet, especially as many pensioners don’t receive the maximum amount.
Karen Barrett, founder and chief executive of Unbiased, said: “It’s essential to consider the State Pension as a supplement to your retirement income, rather than the key to funding it. That’s why it’s vital that you build up your wealth throughout your lifetime to prepare for your golden years, which includes contributing to personal and workplace pensions.
“It’s never too early – or late – to start planning for the future, especially retirement.”
Even someone eligible for the full State Pension of £12,534 next year would still need an additional £19,166 in income from pensions, savings and investments for a moderate standard of living in retirement, which requires an overall income of £31,700 a year, according to the Pensions and Lifetime Savings Association (PLSA). However, they would only need an extra £866 of income for a minimum standard of living in retirement.
The minimum standard covers basic needs such as groceries and home maintenance, as well as the occasional treat or social activity, such as eating out, gift-giving, and taking a short UK holiday. It does not factor in the cost of owning a car. Learn more about the PLSA retirement living standards in our article £13,400 annual income needed to retire, say pension experts.
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If you are seeking ways to maximise your retirement income, you can find tips in our articles Five ways to turbocharge your pension in 2025, Six ways to make your pension work harder, and How to boost your retirement income.
The State Pension and tax
The State Pension is taxable, but the amount of tax you’ll need to pay depends on how much other income you have and whether this pushes you over your £12,570 personal allowance. Your personal allowance is the amount of income you are allowed to receive each tax year without having to pay tax on it.
A pensioner receiving the full new State Pension next April will now only need an extra £35.40 income a year before their personal allowance is used up in full.
Mike Ambery, Retirement Savings Director at Standard Life, part of Phoenix Group, said: “The planned uplift will be some comfort for pensioners grappling with rising bills and the lingering effect of inflation on everyday essentials. However, a full new state pension of £12,534.60 will also be over 99% of the personal allowance, currently frozen at £12,570 until 2028 – by contrast, in 2021/22 the new state pension was equivalent to 74% of the allowance. This means pensioners will need just £35.40 of other income before paying income tax.
“The personal allowance rose fairly rapidly as a percentage of average earnings in the just over a decade before 2020, from 23.61% in the 2007-2008 tax year to just under 45% in 2020. Since 2020, a combination of freezes and inflation has seen this decline, meaning a greater percentage of income is taxable.*
“For pensioners paying the higher rate of tax, the value of the £561.60 rise will be eroded to around £337.”
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