The chancellor has confirmed that the state pension will rise by 4.1 per cent in April 2025.
The full new state pension will increase to £230.30 a week (£11,975 a year) and the full, old basic state pension will go up to £176.45 a week ( £9,175 a year).
This was part of the chancellor's commitment to keep the pensions triple lock in place.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Today’s news spells good news for pensioners who can look forward to a 4.1per cent increase in their state pension from next year.
“However, the rise will be largely wiped out by the government’s decision to restrict the winter fuel payment to pensioners on pension credit.
"With fuel bills on the rise, the loss of up to £300 will be sorely felt and many face a tough winter ahead.”
But Mike Ambery, retirement savings director at Standard Life, part of Phoenix Group, said while it will be a welcome increase, pensioners should watch out for tax implications.
He said: “The personal allowance, which is the amount of income you can receive before paying tax, has been frozen since at £12,570 since 2021/22 and currently remains fixed in for quite a few years to come.
“This means that the full new state pension payment has grown from 70 per cent of the allowance in 2019/20 to a likely 95 per cent next year, leaving pensioners with only £594.40 of headroom before they begin paying income tax.
“While the state pension is on the up, it’s worth remembering that it still falls short of the £14,400 a single pensioner needs for a minimum standard of living in retirement, according to the Pensions and Lifetime Savings Association.
“For our younger generations, one way to future proof their retirement saving is to a look at workplace or private pension provision and make sure to check it matches with their retirement expectations – there are a number of online tools and calculators that can help with this.”
Reeves was expected to extend the income tax threshold freeze beyond its current end date of 2028, but has said today she would not extend this freeze.
From 2028/29 personal tax thresholds will be uprated in line with inflation, she confirmed.
amy.austin@ft.com
