Millions of state pensioners are poised for a payment increase this April. The state pension is subject to an annual rise in line with the triple lock promise, which ensures it increases by the highest of either inflation (based on the previous September’s figure), wage growth (average between May and July), or 2.5%.
This year, state pension payments will see a boost due to wage growth, confirmed at 4.1%. There are two types of state pensions, and the one you claim depends on your birth date. Men born on or after April 6, 1951, or women born on or after April 6, 1953, can claim the new state pension.
Currently, the full new state pension stands at £221.20 per week, or £11,502 annually, but this will increase to £230.30 weekly, or £11,975 annually, from this April.
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The older basic state pension applies to men born before April 6, 1951, or women born before April 6, 1953. The full basic state pension is currently £169.50 per week, or £8,814 annually, but this will rise to £176.45 weekly, or £9,175 annually, from this April, reports the Mirror.
The exact amount you receive for your state pension is determined by your National Insurance record. For the new state pension, most individuals require 35 qualifying years on their National Insurance record to receive the full amount, and typically ten years to receive any amount at all.
Nevertheless, a significant number of pensioners risk being taxed, given the new full state pension rate is nearing the £12,570 tax-free personal allowance. Rachel Vahey, head of public policy at AJ Bell, warned: “The state pension will be at a level perilously close to the frozen personal allowance and should overtake it in a couple of years if things continue, thanks to frozen tax thresholds.”
Vahey further stated, “At that point something must surely give. But slowing the increase in state pension growth or unfreezing the personal allowance both seem unlikely. It could be that this fast-approaching crunch time means the government will finally be forced to address the question of how much the state pension should really offer, at what age, and how it can increase payments sustainably each year.”
In the meantime, the state pension increase has reminded people that there’s a deadline approaching to purchase missing National Insurance years and increase state pension entitlement.
Presently, missing National Insurance years dating as far back as 2006 can be purchased – however, from April 5, the cut-off point will shift, with purchases only allowed for the last six tax years, which could result in people failing to qualify for the full new state pension later on.