Key Takeaways
- The latest triple-lock payment will increase state pensions by 4.8% from April 2026.
- But the majority of those in receipt of the state pension will receive less.
- Pensioners who rely solely on the state pension will pay no income tax if the payouts exceed the £12,570 personal allowance.
Pensioners in receipt of the new state pension as their only income will not have to pay tax on the payments as they rise above the personal allowance, the UK government has confirmed.
This decision, announced just after the Autumn Budget, will come as a relief to pensioners on low incomes and charities working with vulnerable older people. The chancellor, Rachel Reeves, said the move is designed to “ease the administrative burden for pensioners”.
But a former UK pensions minister has described the arrangement as a “complete mess” and one that could entrench unfairness in the system further.
“It’s fair to say that the government hasn’t yet worked out how to do this, but it will face formidable problems in doing it in a way that isn’t complex and doesn’t just create new unfairness and new cliff edges,” says Steve Webb, who in government introduced the new state pension and now works as a consultant for Lane Clark & Peacock.
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How Have UK State Pensions Changed?
State pension payments have been increasing in recent years thanks to the “triple lock”, which raises state pension payments by the higher of wages, inflation, or 2.5%. Recent increases have been significant: April 2023 saw the state pension rise by 10.1% after a bout of high inflation. In 2025 and 2026, rising wages are expected to be the decisive element in payment increases.
The Institute for Fiscal Studies, an influential thinktank, has campaigned against the triple lock, while the Office for Budget Responsibility—the official fiscal watchdog—says the policy has already cost the government three times more than originally intended. In the Autumn Budget, the OBR said the triple lock is set to cost the government £15.5 billion a year by 2030.
The IFS has recommended the triple lock be replaced with a so-called “smoothed earnings link” similar to that used in Australia. This would involve the government setting a target for state pension payments as a share of average earnings.
“Currently a full new state pension is worth about 30% of median full-time earnings. The government could keep that as the target, or it could choose a different one,” the IFS says.
With the latest 4.8% rise confirmed for April 2026, the flat-rate state pension will pay £12,548 a year, just £22 shy of the £12,570 personal allowance. With the personal allowance now frozen until April 2031, the state pension is likely to encroach further into this in the coming years.
Steve Webb, noting public statements from the chancellor that pensioners won’t have to pay income tax until July 2029, says that three groups could feel disadvantaged by this news:
- People on the old state pension, who receive lower payments and may have paid extra to enhance their current payouts.
- People with small amounts of personal pension income as well as the state pension, who will have to pay tax and file “simple assessment” tax returns — an “administrative burden” the government is keen to avoid for some.
- Workers on similar income levels to pensioners but who will pay both income tax and national insurance contributions on earnings above the personal allowance.
Do I Have to Pay Tax on My State Pension After the Budget?
The “flat-rate” state pension, which was launched in 2016, is one element of a much more complex legacy system of state pension payments and eligibility. This includes the “old” state pension, which is paid to men born before April 6 ,1951 and women born before April 6, 1953. It does not include the triple lock in its calculations.
“The triple lock headlines disguise a wide range of circumstances for today’s pensioners,” says Lucie Spencer, partner in financial planning at wealth management firm Evelyn Partners.
“This means that millions of pensioners will not be receiving the estimated full new state pension payout of about £12,540 in 2026/27, which is often portrayed as a headline rate. Generally speaking the older you are the more likely it is your state pension will be less than this, and sometimes substantially so.”
According to the government’s own figures released at the Budget on Nov. 26, around 12 million are in receipt of the UK state pension. More than eight million of these are on the “old” state pension.
In addition to age requirements, retirees possibly eligible for the pre-2016 state pension will need at least 30 years of national insurance contributions or credits to get their full amount, while those potentially eligible for the newer “flat-rate” system require 35 years of national insurance contributions. Anyone with gaps in their national insurance contributions can pay voluntary contributions to make up any shortfalls.
In its 2025 Autumn Budget documents, the government said those due to pay tax on the state pension in future will do so via the “Simple Assessment” system from the start of the 2027/2028 tax year. This means a self-assessment tax return won’t need to be filed, and HMRC will contact the individual directly.
Will I Still Get a State Pension When I Retire?
The fine detail over the future of the state pension and tax comes amid a government-led re-examination of retirement policy announced back in July. This will include a review of the state pension age and a broader discussion of retirement issues, including savings rates and asset allocation.
A repeat of a landmark pensions commission that commenced in December 2002 and resulted in the launch of auto-enrolment workplace pension saving a decade later, this new probe will consider solutions to UK retirement under-saving and whether planned increases to the state pension age should once more be accelerated to manage the government’s liabilities.
Historically, the state pension age has been increased to keep pace with rising life expectancy, but in recent years governments have been under pressure to manage the astronomical cost of the state pension bill.
At the moment, the state pension age is 66 but this will rise to 67 by 2028, with a further increase to 68 planned for the 2040s. Experts expect the state pension age to rise more quickly than that. There has also been discussion of potential “means testing” of state pensions in the future to cover the shortfall.
What Else Happened to Pensions at the Budget?
The state pension wasn’t the only pension policy that was subject to intervention by the chancellor on Nov. 26. In her speech, the chancellor also amended the rules on salary sacrifice pension contributions in the workplace to create a “ceiling” on how much can be sacrificed before tax.
But certain other expected policies did not materialize, including a reduction in the amount of tax-free cash retirees can take from private pensions under the “pension freedom” rules.
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