Millions of pensioners could be hit by a "stealth tax" on their state pension from April next year, as the headline payment is set to rise above the £12,570 personal income tax threshold for the first time. Because the tax-free allowance has been frozen since 2021 and will remain so until at least 2031, the increase pushes many pensioners' income into taxable territory through so-called "fiscal drag", even though the government has pledged to exempt those whose sole income is the full state pension. Pension experts have criticised this planned exemption as unfair, warning it will create a two-tier tax system that leaves the majority of retirees liable for a bill.

Under the triple lock, the state pension is expected to rise from £241.30 to £251.20 a week next April, taking the annual new state pension to around £13,062 — above the frozen personal allowance. Those who retired before April 2016 and receive the older basic state pension would see a smaller rise, to about £192.50 a week (roughly £10,000 a year), keeping them below the threshold if it is their only income. The exact increase depends on average wage growth figures due on 15 September, which are expected to determine the rise since they exceed the latest inflation reading of 2.6 per cent.