By Alex Nelson

Copyright thescarboroughnews

State pension set to rise by around 4.7% from April, adding over £500 a yearFull new state pension could reach £241.05 a week (£12,535 annually)Basic state pension to increase to £184.75 a week, an extra £430 yearlyBut the rise leaves many pensioners just below the £12,570 tax thresholdTriple lock pledge keeps increases in place, but long-term costs raise questions

Millions of pensioners look set to enjoy a pay rise of more than £500 a year from next April, but the uplift could also edge many closer to paying income tax for the first time.

The state pension is protected by the so-called triple lock, which guarantees payments increase each April in line with whichever is highest out of annual wage growth, inflation, or 2.5%.

With average earnings now confirmed to have risen 4.7% in the year to July, pensioners are in line for another bumper increase.

How much extra will pensioners get?

If confirmed, the full new state pension will climb from £230.25 to £241.05 per week – an annual rise of around £613. That would push the yearly payout to about £12,535.

Those on the older, basic state pension would see their weekly rate move from £176.45 to £184.75, giving an extra £430 a year.

The final figure hinges on September’s inflation data, due in October, but with the Consumer Prices Index (CPI) running at 3.8%, wage growth looks almost certain to be the highest measure and therefore the one that sets the rise.

Is it all good news?

The increase will be warmly welcomed by many households struggling with higher living costs. But experts warn the higher payments leave pensioners just shy of the £12,570 personal allowance, the level at which people start paying income tax.

Helen Morrissey, head of retirement analysis at investment firm Hargreaves Lansdown, said: “An uplift of 4.7% takes the new state pension to around £12,535 a year – just a whisker under the tax threshold.

“It means any other income, whether from a workplace pension, savings or part-time work, could tip retirees into paying tax.”

With the personal allowance frozen until 2028, this “fiscal drag” effect means more pensioners are expected to fall into the tax net over the coming years, even if the state pension alone doesn’t take them over the line.

What does it mean for the Government?

The rise will also swell the Government’s already-heavy pensions bill. The triple lock has delivered a string of sizeable increases in recent years – including this April’s record 8.5% boost – and while ministers have promised to keep the policy until the end of the current Parliament, its long-term future is less certain.

There are also wider questions about affordability, with a review of the state pension age under way. Options could include pushing the age threshold further into the late 60s and beyond.

READ MORE: Rising UK State Pension age could see retirement delayed to 70 and affect your money

What happens next?

The Office for National Statistics will release September’s inflation figure next month, confirming the exact rise. While the earnings data could still be revised, most experts expect pensioners can bank on a 4.7% increase.

For now, retirees can look forward to more money in their pocket from April, but many may also need to start thinking about tax planning to make sure that boost doesn’t come with an unexpected bill.

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