There are two main changes to the State Pension that are rumoured to take place at the Budget next week
The Budget will be delivered on November 26(Image: Getty)
There are many big financial changes coming next week as the Chancellor delivers her second Autumn Budget. Some important decisions involving the State Pension will be announced, including rate increases being confirmed.
Chancellor Rachel Reeves is facing some tough financial decisions to try and plug a £50 billion black hole in the nation’s public finances. Brits will find out the full extent of Labour’s plans for the economy when Ms Reeves delivers her second Autumn Budget on November 26.
So far, there has been much speculation as to how the Chancellor plans to cut costs this year, with concerns raised over possible tax rises. One of the major decisions that will be confirmed at the Budget is how much the State Pension will be uprated by the following April.
State Pensions increase each April and the amount they go up by is worked out by the triple lock – a mechanism used to ensure the payment rates rise each year in line with whichever is higher out of inflation, earnings or 2.5%. This is to prevent the value of pensions being reduced by cost of living pressures.
The exact amount that state benefits are set to rise by next year was confirmed following the release of the latest inflation data by the Office for National Statistics.
UK inflation remained unchanged at 3.8% in September – despite the majority of economists and the Bank of England having expected inflation to rise to 4%. The inflation figure for September is particularly important, as it is normally used to help calculate how much the State Pension and many welfare benefits will rise by next April.
The triple lock ensures the State Pension increases every April in line with whichever is the highest of earnings growth between May and July, inflation in September, or 2.5%. Wage growth for May to July was 4.8% and as this is higher than September inflation, this is the figure that will be used to increase the State Pension by next year.
Chancellor to confirm State Pension increase
Given September’s inflation, the Triple Lock Promise is lower than average earnings growth figure for May to July 2025 of 4.8% – meaning that in April 2026 the full rate of the new State Pension is likely to rise by £11 to £241 per week.
While not every pensioner receives exactly this amount, the majority of newly retired pensioners receive the full rate of the new State Pension, or an amount very close to this.
Although its widely expected that the State Pension will increase by 4.8% in April, this still needs to be confirmed by the Chancellor next week at the Budget.
Once this is confirmed, pensioners can expect to see the following increases in their payments.
State Pension payments 2025/26
Full New State Pension
- Weekly payment: £230.25 (from £221.20)
- Four-weekly payment: £921 (from £884.80)
- Annual amount: £11,973 (from £11,502)
Full Basic State Pension
- Weekly payment: £176.45 (from £169.50)
- Four-weekly payment: £705.80 (from £678)
- Annual amount: £9,175 (from £8,814)
State Pension to be taxed?
As well as State Pension rate increases, there has been much speculation over if pensioners will be pushed into paying tax at the next Budget.
The full, new State Pension is expected to rise to around £11,973 a year next spring in line with the triple lock policy. These new rates will be confirmed at the Autumn Budget.
New State Pension rates are predicted to exceed the Personal Allowance threshold – the income you don’t pay any tax on – by April 2027. However, some pensioners may still be forced into the tax bracket in 2026 due to rising incomes.
There are increasing reports that Chancellor Rachel Reeves will freeze the income tax thresholds at next week’s Budget. The lowest tax threshold at £12,570 has been frozen since 2021 – and Ms Reeves is said to be considering extending this from 2028 for an extra two years to 2030, Essex Live reports.
The freeze means some of the most financially vulnerable workers are taxed as soon as their pay goes past £12,570 – and because it has stayed static, inflation and rising wages mean millions more are now paying tax than would have been had it increased as normal.