State pension triple lock: Labour confirms pension rise and tax exemption

Labour has pledged to maintain the state pension triple lock while confirming pensioners whose only income is the state pension will not pay income tax on their payments.

Prime Minister Andy Burnham and Chancellor John Healey confirmed the commitment, with the Government guaranteeing annual state pension payments of at least £9,855 for older pensioners from April 2027 if the minimum 2.5 per cent triple lock increase applies.

The policy would deliver a minimum annual increase of £240.37 for pre-2016 pensioners who have a full National Insurance contribution record.

HM Treasury also confirmed that pensioners whose only income comes from the full new or basic state pension will not be liable to pay income tax.

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A Treasury spokesman told the i Paper: "Anyone whose only income is the full new or basic state pension without any increments will not pay income tax and we are committed to that over this Parliament."

The announcements come despite growing criticism of the long-term affordability of the triple lock.

The Office for Budget Responsibility and the Tony Blair Institute have both described the policy as "unsustainable", while a House of Commons report published on July 11 warned rising state pension costs alongside widening health inequalities risk making the system "extremely unfair".

Under the triple lock, the state pension rises every April by whichever is highest between inflation, average earnings growth or 2.5 per cent.

If the minimum 2.5 per cent increase were applied in April 2027, the full basic state pension for those who reached state pension age before 2016 would rise from £9,614.80 to £9,855.17 a year.

Should inflation or earnings growth exceed 2.5 per cent, pensioners would receive a larger increase.

That was the case this April when average earnings growth of 4.8 per cent determined the annual uplift.

The two state pension systems continue to provide different levels of support depending on when someone reached state pension age.

Those who retired before 2016 receive a lower weekly payment, meaning the same percentage increase produces a smaller cash rise.

Their weekly state pension increased from £176.45 to around £184.90 this April.

By comparison, those receiving the new state pension saw weekly payments increase from £230.25 to £241.30.

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These figures do not include additional entitlements such as the Second State Pension or SERPS.

The tax commitment addresses concerns over the interaction between the triple lock and the frozen personal allowance.

The income tax personal allowance has remained at £12,570 since 2021 while state pension payments have continued to increase each year.

Based on the minimum 2.5 per cent increase, the full new state pension is projected to rise to around £12,861 a year from April 2027.

Without the Government's commitment, pensioners whose only income came from the full new state pension would have become liable to pay income tax for the first time.

Former Chancellor Rachel Reeves initially indicated during her Budget speech that pensioners would avoid paying "small amounts of tax via self-assessment".

She later clarified on the Martin Lewis Money Show Live that pensioners whose only income is the state pension would not pay income tax.

Tom Selby, director of public policy at AJ Bell, said: "The policy of ratchetting up the state pension through the triple lock has serious long-term fiscal implications.

"The Chancellor should be honest about the trade-offs and set out a sustainable policy for the state pension that gives pensioners certainty while recognising pressure on the public finances."

Mr Selby argued that increasing the personal allowance could provide a broader solution.

He said: "Increasing the personal allowance would help everyone by handing taxpayers across the spectrum the same tax saving.

"But for the lowest earners, the financial boost will be larger as a proportion of their total income, meaning it would make a big financial difference to those with the least financial strength."

A £500 increase to the personal allowance would lift the threshold above projected new state pension levels while also reducing the effects of fiscal drag for working households.

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