Millions of UK residents relying on state pension payments could be facing an unpleasant surprise.
According to the latest updates, changes in the state pension age, along with rising inflation and potential tax liabilities, may cause future pension pay-outs to be less than expected.
This could significantly impact financial planning for retirees who assumed a full state pension at 66.
How Much is the State Pension in 2025?
As of now, there are two types of state pensions:
| Type | Weekly Payment | Annual Payment |
|---|---|---|
| New State Pension | £230.25 | £11,973.00 |
| Basic State Pension | £176.45 | £9,175.40 |
These amounts are calculated before tax and are subject to annual increases under the triple lock guarantee, which ties pension increases to the highest of inflation, average earnings growth, or 2.5%.
Triple Lock Concerns: Will You Pay Tax on Your Pension?
The triple lock may provide welcomed annual boosts, but with the full new pension nearing the income tax personal allowance threshold of £12,570, retirees could unintentionally be pushed into taxable income brackets.
- A 5% rise in 2025 could increase the annual pension to £12,571.65, breaching the threshold.
- This means pensioners may start paying income tax on state pension alone.
- Over 80% of pensioners are already taxed, according to the 2022/23 data.
Pension Age Increase: What It Means for You
Starting April 2026, the state pension age will increase gradually from 66 to 67 by April 2028, affecting millions nearing retirement.
New State Pension Age Timeline:
| Date of Birth | Pension Age |
|---|---|
| Apr 6, 1960 – May 5, 1960 | 66 years, 1 month |
| May 6, 1960 – Jun 5, 1960 | 66 years, 2 months |
| Jun 6, 1960 – Jul 5, 1960 | 66 years, 3 months |
| Jul 6, 1960 – Aug 5, 1960 | 66 years, 4 months |
| Aug 6, 1960 – Sep 5, 1960 | 66 years, 5 months |
| Sep 6, 1960 – Oct 5, 1960 | 66 years, 6 months |
| Oct 6, 1960 – Nov 5, 1960 | 66 years, 7 months |
| Nov 6, 1960 – Dec 5, 1960 | 66 years, 8 months |
| Dec 6, 1960 – Jan 5, 1961 | 66 years, 9 months |
| Jan 6, 1961 – Feb 5, 1961 | 66 years, 10 months |
| Feb 6, 1961 – Mar 5, 1961 | 66 years, 11 months |
| Mar 6, 1961 – Apr 5, 1977 | 67 |
If you were planning your retirement based on the age of 66, you may have to wait several more months, or even a full year longer than anticipated.
The Financial Impact: Could You Lose Nearly £6,000?
Due to the age shift from 66 to 67, some pensioners could lose up to £5,980 in missed payments (based on £230.25 weekly).
This loss does not account for future increases under the triple lock, meaning actual losses could be even higher.
What Is the Government Doing About It?
- The income tax personal allowance will remain frozen at £12,570 until April 2028, per the previous government’s decision.
- The new government decided not to extend the freeze but has yet to announce a meaningful increase.
- DWP maintains support for the triple lock, promising a £31 billion investment that could raise annual state pensions by up to £1,900 over this Parliament.
The DWP state pension warning serves as a timely alert for those approaching retirement. Whether it’s the age increase, potential tax liabilities, or the real value of your triple lock increase, these changes could significantly reduce your expected income.
It’s crucial for pensioners to reassess retirement plans and stay informed on government policy shifts to avoid being caught off guard.
FAQs
What is the current full new state pension in 2025?
It stands at £230.25 per week or £11,973 annually, before tax.
Who is affected by the rising state pension age?
People born after April 6, 1960 will see their pension age increase gradually from 66 to 67 by 2028.
Could I pay tax on just my state pension?
Yes, if your pension exceeds the £12,570 personal allowance, you may have to pay income tax.