Experts said the bonus will cover rising living costs.
Pensioners will receive £562 bonus next year (Image: Getty)
British state pensioners will receive a £562 bonus next year as the state pension rate for 2026/27 was confirmed under triple lock terms. The triple lock ensures pension rises every year in line with whatever is highest out of inflation, wage growth, and 2.5%. Wages are up 4.7% and that is what will determine the latest increase. A 4.7% rise will push the annual rate up to £12,535 – an increase of £562. The payment boost will begin next April.
Pension experts at Spencer Churchill Claims Advice said that’s a “meaningful increase, especially for those relying heavily on it to cover everyday expenses.” However, it will also push pensioners with additional income towards paying income tax for the first time because of frozen tax tresholds. Freezing tax thresholds means that as wages increase, more people will need to pay tax or pay it at a higher rate, without the Government actually having to put up taxes.
The bonus is believed to be valuable for people relying on it for everyday expenses (Image: Getty)
Mike Amber, retirement savings director at Standard Life, said: “For pensioners paying the higher rate of tax, the value of the £561.60 rise will be eroded to around £337.”
Spencer Churchill Claims Advice spokesperson added: “The rise also brings the state pension close to the frozen personal tax allowance, meaning more retirees could end up paying income tax on their pension alone.
“Pension rises look good on paper, but frozen personal allowances mean retirees don’t always feel the full benefit.
“This is called fiscal drag – where an increase in pension income simply pushes people into tax thresholds.
“Many pensioners who only rely on the state pension will soon find themselves paying tax for the first time, while those with workplace or private pensions are already there.”
Experts have also warned that the additional money will go to covering rising living costs and won’t make much difference as a result, BirminghamLive reports.
Steve Webb, former pensions minister and partner at LCP, said: “Although an extra £560 per year will be welcomed, for most pensioners this will be largely eaten up by the increase in the cost of living.
“The Bank of England forecasts that inflation will hit around 4 per cent in September, gobbling up most of the 4.7 per cent state pension rise, leaving a real increase of less than 1 per cent.”
