The state pension will become less generous from next year (Image: Getty)
People calculating how much state pension they will get over the course of their retirement may find their payments are less generous than they think.
The full new state pension is currently £230.25 a week, or £11,973 a year, while the full basic amount pays £176.45 a week, or £9,175.40.
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State pensioners get a boost to their pay each April, thanks to the triple lock policy, which guarantees a rise in line with the highest of 2.5%, average earnings or inflation.
But some crucial changes coming in from next April could eat into how much claimants get. The first change which is set in stone, is the state pension age will increase in stages from 66 to 67.
This will start from April 2026, with the state pension age going up by one month each time it increases, until April 2028.
For example, if your date of birth is between April 6, 1960 and May 5, 1960, your state pension age will be 66 years and one month.
If you were born between May 6, 1960 and June 5, 1960, you will have to wait another month, as your state pension age will be 66 year and two months.
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This is how the state pension age increase from 66 to 67 will work depending on your birth date:
- April 6, 1960 – May 5, 1960 - 66 years and 1 month
- May 6, 1960 – June, 1960 - 66 years and 2 months
- June 6, 1960 – July 5, 1960 - 66 years and 3 months
- July 6, 1960 – 5 August 5, 1960 - 66 years and 4 months
- August 6, 1960 – September 5, 1960 - 66 years and 5 months
- September 6, 1960 – October 5, 1960 - 66 years and 6 months
- October 6, 1960 – November 5, 1960 - 66 years and 7 months
- November 6, 1960 – December 5, 1960 - 66 years and 8 months
- December 6, 1960 – January 5, 1961 66 years and 9 months
- January 6, 1961 – February 5, 1961 - 66 years and 10 months
- February 6, 1961 – March 5, 1961 66 years and 11 months
- March 6, 1961 – April 5, 1977 - 67.
Those planning for their retirement may want to note that the state pension age will increase again from 67 to 68, between 2044 and 2046.
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Losing out on just six months of state pension payments due to your state pension age going up would mean you would lose out on around £5,980 in payments, at the full new state pension rate.
Plus the increase to the state pension age will come after next April's triple lock increase, so the loss of payments will be even more.
The other factor that could eat into the value of the state pension is the fact the full new state pension could be taxed from next year.
This is because the full new rate amounts to £11,973 a year, which is just £600 away from using up all your personal allowance and attracting an income tax bill.
Just a 5% increase to the state pension would lift claimants above the threshold. Such an increase currently looks likely, as the average earnings figure is the highest of the three triple lock measures, at 5.6% in the latest figures.
Labour was recently asked if it would consider lifting the personal allowance for state pensioners so they don't have to pay tax on their state pension payments alone.
DWP minister Torsten Bell said in response: "The previous Government made the decision to freeze the income tax Personal Allowance at its current level of £12,570 until April 2028.
"At our first Budget, we decided not to extend the freeze on personal tax thresholds." He also pointed to figures showing that in the 2022/2023 tax year, more than 80% of pensioners were already paying income tax.
The minister also said: "This Government is absolutely committed to supporting pensioners and giving them the dignity and security they deserve in retirement.
"Over 12 million pensioners will benefit from our commitment to protect the triple lock which is set to increase spending on the state pension by around £31billion and will increase people's yearly state pensions by up to £1,900 this Parliament."
