State pension warning as savers on brink of paying tax - 'triple lock must be scrapped'

An increase to the state pension could leave thousands of pensioners less than £23 away from the threshold for paying income tax for the first time, as the Institute for Fiscal Studies calls for the triple lock to be scrapped. It comes as the Office for National Statistics' wage growth figure for May-July this year, which is used in the triple lock calculations, was revised from 4.7% to 4.8%.

It means many older people may be getting more than had been anticipated, and edging towards having to pay income tax. The Triple Lock automatically raises state pension payouts each year, either by inflation, wage growth or a flat 2.5%, whichever is highest.

The wage growth figure is expected to be higher than the rate of inflation (currently 3.8%) as well as the 2.5% minimum annual increase, meaning the state pension is now expected to increase by 4.8% in April 2026, rather than the previous estimate, which was 0.1% lower, The i newspaper reports.

It will see people on full New State Pension getting an additional £574.60 annually (£12,547.60 in total). This figure is just £22.40 shy of the personal tax allowance threshold, which has been frozen at its current £12,570 level.

There are 8.72 million people over state pension age over the threshold for paying income tax due to other income, according to HMRC data, the newspaper reports.

But analysts estimate that the increase could see a further 400,000 pensioners who rely only on state pensions being liable for tax next year.

The IFS Pensions Review, published in July argued that the triple lock should be replaced after the state pension reaches 30% of median full-time pay.

After that, increases would be linked to earnings growth, with a guarantee they would not fall behind inflation.

It also called for a commitment to never means-test the state pension and for increases in the state pension age to be linked to rising life expectancy, but introduced gradually to give people time to plan.

IFS director Paul Johnson said: "The current generation of retirees is, on average, doing much better than any previous generation. Levels of pensioner poverty have fallen dramatically and, overall, the retired population are better off than the working-age population. But there is a risk that policymakers have become complacent."

"Without decisive action, too many of today's working-age population face lower living standards and greater financial insecurity through their retirement," he added.

However, the Public and Commercial Services Union (PCS) pushed back against the idea, saying it would be a "backwards step".

The union's President Martin Cavanagh said: "The UK state pension remains the lowest in the G7. Most UK pensioners do not even receive the current state pension rate of £230.25 per week.

"It would be a backward step to stop increasing its value by replacing the triple lock with a pension ceiling. State pension levels should continue to rise above arbitrary fiscal targets and ensure that pensioners can live free from poverty.

"At the general election, Labour promised to retain the triple lock. The challenge to eliminate pensioner poverty remains and the country expects this promise to be honoured."

The Department for Work and Pensions (DWP) has been approached for comment via email.