What does the budget mean for pensioners?

The Chancellor confirmed that the state pension will rise 4.8 per cent for the 2026/27 financial year, as determined by the triple lock mechanism.

The full new state pension will increase by about £570 a year, she said – for people who reached the state pension age after April 6 2016. Those who retired before then on the full basic state pension will get a lower increase.

Lucie Spencer, Partner in Financial Planning at wealth management firm Evelyn Partners, comments: “The triple lock headlines disguise a wide range of circumstances for today’s pensioners. For a start, only one in three (36%, or 4.7million) pensioners get the full new state pension.

“The reality is that pensioners receive not “the state pension” but a dizzying array of different payouts depending on when they reached state pension age, whether they had opted out of the old system, and whether they had accumulated enough National Insurance Contributions (35 years contributions if you retire after 6th April 2016), to name just a few of the variables.

“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.”

The differences for many are between those who have private pensions or other savings that supplement their state pension, and those who don’t.

“No one finds it particularly easy to live on the state pension alone, and it’s one of the big public policy predicaments of our time that even though for most retirees the state payout is inadequate to rely upon, it’s also reckoned to be fiscally unsustainable in its current form,” says Lucie.

“While the politicians and civil servants sort that one out, or don’t, those yet to reach retirement might want to take matters into their own hands – if they can of course – and start saving as much as their means allow.

“As for income tax, the personal allowance freeze at £12,570 – which was also extended to 2029/30 today – does mean more state pensions will be taxed and that will accelerate in 2027/28 and subsequent years.

“You won’t find many pensioners complaining about triple lock increases because of this, although plenty would argue that the personal allowance should be raised to remove the anomaly.”

For those looking ahead to retirement, there are also some changes to consider.

Recommended reading:

Alex Edmans, Product Director at Saga Money says: “Today’s Budget brings some mixed news for people over 50. It’s positive to see the commitment to the Triple Lock, meaning that the state pension is set to increase by more than inflation next April, giving many pensioners an extra £500–£550 per year.

“However the cap on tax-efficient pension contributions via salary sacrifice could discourage saving for retirement, especially for those still working.

“We recognise that people over 50 rely on careful saving or a mix of savings and pensions for retirement income.

“We believe it’s essential that retirement saving remains affordable and urge those affected to review their pension plans now to understand what this news means for their long-term income security.”