The state pension could rise by 3.7% next year (Image: Getty)
State pensioners could get a 3.7% boost to their payments next year, potentially increasing the full new by £442 a year.
Payments will increase 4.1% from the start of April, lifting the full new from £221.20 a week to £230.25 a week, while the full basic amount will go up from £169.50 a week to £176.45 a week.
Personal finance expert , from , pointed that payments could increase by 3.7% next year if the inflation measure of the is what determines the April 2026 increase.
She explained: “The Bank of England’s latest forecast suggests the Consumer Price Index (CPI) could hit 3.7% later this year, pushing up the price of essential goods and services.
“If the full new rose by 3.7% next year, this would equate to an increase of around £8.50 per week. For those on the basic , the increase would only be around £6.50 per week.”
A 3.7% boost would increase the full new from £230.25 a week to £238.75 a week, or £12,415 a year, an increase of £442 annually.
The full basic would go up from £176.45 a week to £183 a week, up to £9,516 a year, an increase of £340.60 a year.
Even if inflation is at these levels when the 2026 increase is calculated, it could actually be more if the rise in average earnings outpaces inflation.
Discussing which factor could be the chosen metric for next year’s pay boost, Ms Knight said: “The tax hikes that will kick in for businesses from April will make it harder for employers to offer generous salaries or dish out pay rises.
“If wage growth cools off and inflation tracks sharply upwards as expected, September’s CPI figure could exceed the increase in average earnings, making it the determining factor for setting the for 2026.”
But she added that if the Bank of England can achieve its 2% target for inflation over the coming years, the average earnings measure could be the key figure again.
Labour has committed to the for the rest of this Parliament, while the Conservatives went further in their General Election bid last year, saying they would bring in a ‘ plus’ where the personal allowance for pensioners would also go up in line with the ,meaning the would never be subject to income tax.
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From this April, the full new will add up to £11,973 a year, just £600 away from crossing the £12,570 personal allowance limit and becoming subject to income tax.
Ms Knight warned that the is already a “huge cost” for the Government and so ministers will be forced to discuss changing it before too long.
She explained: “Around a quarter of all spending goes on social security, including the and working-age benefits such as Universal Credit.
“However, the three main political parties have all pledged to maintain the , with some analysts predicting the could rise to £13,000 per year if it’s maintained past the next General Election.”
Another concern with the rising bill is that the UK has an aging population, meaning there are fewer workers able to pay in through their National Insurance so recipients can get their .
Ms Knight encouraged people planning for their retirement to put funds into their own pensions, despite the pressures of rising living costs.
She said: “It’s hard to prioritise saving into a personal pension for the future when you’re struggling to pay the bills or put food on the table today.
“However, for those who can afford to make provision for their retirement, saving into a pension is worthwhile at any age, as any money you put away will benefit from a government top-up of 20% for basic rate taxpayers.”