Is 4.7% State Pension Increase Sustainable?

You will see splashed across the headlines for today and tomorrow that with the triple lock, the State Pension will increase next April by the higher of

• 2.5% pa
• Consumer Prices Index for September 2025 – due tomorrow but looks likely to stay at 3.8% pa or increase to 3.9% pa.
• Average earnings inflation growth in May to July 2025 was 4.7% pa.

This means we are all expecting an increase of 4.7% pa in April 2026 (unless the Chancellor pulls this in the Autumn 2026 Budget).

State Pension Forecast for 2025/26

The current full state pension (2025/26) is £230.25 per week (£11,973 pa).  With a 4.7% pa increase, this would push the weekly state pension to £241.05 per week (£12,534.60 pa).

Total Cost to Government

It was estimated that in 2024/25, with the UK state pension at £221.20 per week, this cost the UK government approximately £138 billion.  This was around 83% of total UK benefit spending.  Guetimating annual costs, we project government spending on state pensions to:  4.09%

• 2025/26 ≈ £144 billion
• 2026/27 (next year) ≈ £151 billion.

Comment - Is this sustainable? 

The 2025/26 budgets for Defence are £59.8 billion and the NHS £202 billion.  We need to be on a ‘Defence’ footing for government spending.  It will be great having a state pension of £241.05 per week but if the country cannot defend itself then many may never collect their state pensions anyway.

We cannot see how the Government can continue with the ‘Triple Lock’ when the working population, in particular employers, are getting hammered for increased national insurance contributions and increases to payroll given the ‘domino effect’ of massive minimum wage increases this year, now passing up the line as middle and senior supervisors and managers are also demanding more to maintain the ‘gap’ between them and those on lower ‘rungs’. 

HMRC Taxation Headache

The state pension is forecast to rise to £12,534.60 pa.  It is paid gross, without deduction of income taxes meaning that more and more pensioners (with higher state pensions and also company/private pensions) are going to be paying tax given the Personal Tax Allowance is frozen currently at £12,570 pa, just £35.40 pa above the forecast state pension (that’s just 68p per week below the threshold).