Pensioners are set for another large rise in the state pension next year - forcing many of them to pay income tax.

The double-edged news followed the Office for National Statistics (ONS) announcing the rise in annual earnings for September was 8.5%, setting the bar for state pension in April.

Under the UK Government’s ‘triple lock’ system, the state pension rises by whichever is higher - the CPI inflation rate, average earnings growth or 2.5%. 

With the earnings measure expected to be higher than CPI inflation for September, that means an 8.5% rise in the state pension next year, on top of the 10.1% rise this year.

That could take the average weekly new state pension from £203.85 to £221.20, or from around £10,600.20 to £11,502.40 for the year.

The basic state pension could rise from around £156.20 to £169.50 per week – from £8,122.40 to £8,814.00 annually.

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But with the personal tax threshold due to be frozen again at £12,570 next year, a large pension rise will drag many pensioners with other small incomes into paying income tax.

The Department for Work and Pensions (DWP) said the Government was committed to the triple lock, with the standard review of benefits and state pensions due in the autumn.

However  Work and Pensions Secretary Mel Stride said the triple lock “is not sustainable” in the long term.

He told BBC Radio 4: “The Office for Budget Responsibility, the main independent forecaster, comes forward with the fiscal sustainability report on an annual basis.

“And it casts out 50 years, and it looks at the impact of the increase in the state pension on the triple lock.

“We’ve known for a long time, that in the very, very long term...  it is not sustainable. But of course, what I’m dealing with is now and where we stand at the moment, is we remain committed to the triple lock. And that’s the path that we will be taking.

“But as to the future, and after future general elections, and so on and so forth, who knows. But that’s the position we’re in at present.”

The triple lock was introduced by the Tory-led coalition government in 2010 to ensure pensioner income did not lose value in real terms.

The Institute for Fiscal Studies says an extra £11bn a year is spent on state pensions under the triple lock, compared to increasing the benefit in line with prices or earnings.

Sir Steve Webb, a former pensions minister who is now a partner at Lane Clark & Peacock (LCP), said: “Today’s figures for earnings growth are likely to mean a second successive significant cash increase in the value of the state pension, following on from this year’s 10.1% increase.

“Alongside a continued freeze of the tax-free personal allowance, this is likely to drag well over half a million more pensioners into the income tax net. 

“Once again, ‘stealth’ taxation proves a convenient revenue-raiser for the Chancellor.

“With a general election in the offing it seems quite inconceivable that the Government would choose to break the triple lock promise for a second time in three years.

“Such a decision would be like aiming a laser-guided missile at the core of Conservative support and could fatally undermine the party’s electoral prospects.”

HMRC figures suggest the number of people aged 65 and over who pay income tax rose from 7.73 million to 8.5m after the April 2023 state pension increase.

A further rise of 8.5% could add 650,000, taking the total to 9.15m.

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Jason Hollands, managing director at wealth management firm Evelyn Partners, said: “Anyone with even a very modest private income will be tipped into paying basic rate tax at 20%, with some estimates expecting half a million more pensioners to become taxpayers in the next tax year.”

Prime Minister Rishi Sunak recently declined to say if the policy will feature in his party’s manifesto at the next general election, due by January 2025.

Speaking on his trip to the G20 summit in India, he said: “We’re not going to speculate on the election manifesto now. I’ve got plenty to get on with between now and then. But the triple lock is the Government’s policy and has been for a long time.”

John O’Connell, chief executive of the TaxPayers' Alliance, said the triple lock was putting “unsustainable pressure on the public finances” limiting the scope for tax cuts. 

“While pensioners deserve to be protected from inflation, it is unfair on workers who have been playing catch up with price rises to insist that they fund inflation-busting pension boosts, particularly with the tax burden at a 70-year high,” he said. 

“Until the government reforms the triple lock to ensure fairness for pensioners and workers alike, tax cuts for all will be harder to afford.”

A DWP spokesman said: “The Government is committed to the triple lock.

“As is the usual process, the Secretary of State will conduct his statutory annual review of benefits and state pensions in the autumn, using the most recent data available.”