State pension increase and new tax allowance announced

Britain's retirees will see their state pension rise 3.9% to £13,036 a year from next April, an increase of £489 per week. Chancellor John Healey said the new pension tax allowance will be set at £13,037 until 2030, ensuring those whose only income is the state pension will not pay income tax.

Details of the pension boost

The rise follows the triple-lock rule, which guarantees a yearly increase equal to the highest of wage growth, inflation or 2.5%. Wage growth was the highest this year, reaching 3.9% between May and July.

To claim the full new state pension, individuals normally need 35 qualifying years of National Insurance contributions, but anyone with at least ten qualifying years will receive a proportional increase from April.

How the tax allowance works

The allowance of £13,037 matches the new pension level, meaning pension-only earners will stay below the income-tax threshold of £12,570. Once income exceeds the allowance, tax will apply.

Healey said: "For pensioners, I am delivering the new Pension Tax Allowance - so that pensioners with income up to the value of the full new State Pension will not pay Income Tax in this Parliament."

Guidance for pensioners and future claimants

People can use the provided calculator to estimate their future pension based on their National Insurance record, or check the official forecast at gov.uk/check-national-insurance-record. Those without 35 years of contributions may top up their record to reach the maximum rate.

Individuals not yet at state pension age should visit gov.uk/check-state-pension to see if voluntary contributions would be beneficial. The Pension Service can be contacted on 0800 731 0469 for advice on extra payments.

Gaps in Class 2 or Class 3 contributions can be paid at original rates, with a deadline of April 5 each year. Workers have until April 5 2031 to fill missing contributions from the 2024-2025 tax year.

Before paying voluntarily, it is advisable to check if free NI credits can cover the gaps, as many miss out on these credits.

Expert pension advice offer

Independent financial advice firm Kellands Chartered Financial Planners are offering Sun Money readers a free one-hour consultation worth £250.

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