New calls for ‘living’ State Pension payments of £364 every week to match National Minimum Wage

A new online petition is calling on the UK Government to create a ‘living’ State Pension paid to people in retirement at the same rate as the National Living Wage for those aged over 23. The proposal would see some 12.6 million pensioners receive £343 each week, or just under £19,000 each year.

Joseph Coyle has created and posted the petition on the official petitions-parliament website and states: “The majority of pensioners have worked and contributed to society for decades, but the State Pension falls well below the income of someone working full-time at the National Living Wage. We want the Government to increase the State Pension to equal 35 hours a week at the living wage for 23 and over.”

He goes on to say: “Surely, a ‘living’ pension should, at the very least, be equal to full-time work on the minimum wage. Please respect those in society who have contributed, and treat them equitably for what they have contributed to our society.”

Following a bumper annual uprating of 10.1 per cent in April, the full New State Pension is worth £203.85 each week, or £815.40 every four-week pay period, and £10,600 over the 2023/24 financial year.

The full Basic State Pension is worth £156.20 each week, some £624.80 every four-week period and over £8,122 over the coming year.

The 2023/24 National Minimum Wage rate for those aged 23 and over is £10.42 per hour, which works out at £364.70 for a 35-hour working week. This would be an annual salary (before tax and NI deductions) of £18,964.

The petition is open until October 6, 2023. If the proposal receives 10,000 signatures, the UK Government will respond – view it online here.

Both the Conservatives and Labour recently committed to honouring the Triple Lock guarantee on State Pensions until the end of the decade (2030). The policy was introduced by the Coalition Government in 2010 to ensure that the State Pension rises in line with the greater of the September’s Consumer Price Index (CPI) inflation rate, earnings growth, or 2.5 per cent.

New inflation figures released on Wednesday show that for the 12 months to June, inflation was 7.9% – down from 8.7% in May.

The Bank of England’s latest CPI inflation rate forecast for September is 7%, which would boost the full New State Pension from £10,600 to £11,342 from April 2024.

Estimated State Pension payments from April 2024

The estimated calculations below show the current annual rates for the full New and Basic State Pensions at the Bank of England forecasted increase of 7 per cent.

How much someone receives depends on the number of years worth of National Insurance contributions, around 35 is needed for the full New State Pension, but this may be more if you were contracted out – find out more here.

Current Annual Full New State Pension – £10,600

7% inflation – £11,342 (up £742)

• Weekly: £218
• Monthly: £872

Current Annual Basic State Pension – £8,122

7% inflation – £8,691 (up £569)

• Weekly: £167
• Monthly: £658

The latest expenditure figures from the DWP show that the State Pension cost the UK Government an estimated £112.5 billion to deliver in 2022/23 and is forecast to rise to £139.5bn in 2027/28, in real terms. However, in nominal terms the estimated increase is more – from £109.7bn to £147.2bn.

State Pension and income tax

Finance experts at wealth management firm Evelyn Partners said that the latest annual income tax statistics from HM Revenue and Customs (HMRC) estimates that there are 8.1million people over State Pension age paying income tax in the 2023/24 financial year. This is a 25 per cent increase on the 6.47million pensioners who paid income tax in 2020/21.

Gary Smith, Partner in Financial Planning at Evelyn Partners, warns that a “policy showdown is on the horizon” between the Triple Lock and the personal income tax allowance freeze.

He explained: “Both Conservatives and Labour have pledged a commitment to the Triple Lock in their manifestos for the upcoming general election. And the policy of the current UK Government is to keep the personal allowance frozen until at least 2027/28 at £12,570, with no indication of an alternative policy from Labour.

“If the Bank of England’s latest forecast for September inflation of 7 per cent is correct, then the Triple Lock – assuming wage growth does not exceed 7 per cent – will boost the full New State Pension to £11,342 in the 2024/25 tax year.”

He added that in the subsequent three years it will require Triple Lock increases of “just” 3.5 per cent to send the annual State Pension income above the frozen personal tax allowance threshold of £12,570.

He continued: “That then presents a conundrum to the Uk Government of the time: create an administrative and political headache by taxing the State Pension, possibly at source – which would be massively unpopular among the more than 13 million people then expected to be of State Pension age – or make the headache go away by raising the personal tax allowance for everyone.”

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