State pensioners can plan ahead for when their payments increase in April as the exact date for the 8.5 percent pay rise has been confirmed.
Chancellor Jeremy Hunt has confirmed the pay increase will come into effect from Monday, April 8. Pensioners may want to note some other important financial dates around this time.
The new tax year starts on Friday, April 6, and benefit payments are due to increase 6.7 percent from this date. This includes pensioner benefits such as Pension Credit and Attendance Allowance.
Britons are also expected to get a drop in their energy bills from April 1, when the new energy price cap comes into effect. Cornwall Insight are predicting the cap will drop 14 percent, with bills for a typical dual fuel customer dropping from the current £1,928 a year to £1,660 a year.
April 1 is also Easter Monday, so any pensioners planning to go away or visit family over the Easter weekend may want to factor in their payments a week later.
How much is the state pension increasing?
With the 8.5 percent increase, the full new state pension will go up from £203.85 a week to £221.20 a week, meaning these pensioners will get £884.80 each four-week pay period. This amounts to an increase of just over £900 a year.
People on the full basic state pension will see their payments rise from £156.20 a week to £169.50 a week, which is £678 for each pay period. This is an uprating of almost £700 a year.
As the rising state pension reaches ever close to the threshold for paying income tax, a petition was recently launched calling for the payments to be made tax-free.
The Parliamentary petition, which has already reached 10,000 signatures, reads: “The Government should remove income tax on state pension payments, to reduce the tax burden on pensioners.
“As the personal tax allowance has been frozen, some pensioners will now need to fill in tax return. We believe income from state pensions should be tax-free, in the same way as benefits are.”
The threshold for paying income tax has been frozen at £12,570 a year, meaning a person who earns more than £242 a week will have to pay income tax.
Roddy Munro, tax and pensions specialist at Quilter, said previously: “We are soon set to be in the perverse situation where pensioners might have to start paying back their state pension to HMRC because of frozen allowances.
“Given that state pensions will shortly eradicate someone’s personal allowance, any private pension provision other than the tax-free cash lump sum will therefore become taxable at a client’s highest marginal rate.
“For many that could mean big tax bills depending on how much they drawdown. In addition, with the maximum amount of tax-free cash available now capped at £268,275 this adds in another layer of complexity if strong investment returns are achieved as this can only now ever lead to increasing the amount of someone’s pension that becomes fully taxable.”
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