Martin Lewis has raised fresh concerns about the future of the State Pension, suggesting that while it is unlikely to be scrapped altogether, changes could be on the horizon. Speaking on his podcast, the Money Saving Expert founder admitted it is “possible” the pension could one day be means-tested if the triple lock system comes under serious threat.
The 52-year-old financial guru was asked by a caller if there was any chance the State Pension might be scrapped. He responded: “Yes, it is possible. Parliament is what is called omnicompetent – a technical term meaning parliament can legislate anything it chooses to do. Do I think it’s likely? No”, reported the Manchester Evening News.
Lewis explained that the bigger risk facing people is the age at which they can access their pension. “I think the most likely eventuality with the state pension is that the age at which you get it is increased. And I certainly think by the time someone who is 18 now retires, it’s probably going to be in their 70s when they get their state pension, not in their late 60s,” he said.
He went on to rank the risks in order. “I would say that is the most likely risk. The next most likely risk, and I think we’ve moved from the first one, which is probable, so I think that is likely to happen. This next one I think is unlikely to happen but not improbable. Limited odds, but I wouldn’t be bowled off my chair if it were to happen sometime in the next 20-30 years.”
His comments came just after news broke that the State Pension will rise by 4.7% next April, in line with average earnings growth confirmed by the Office for National Statistics. The triple lock ensures pensions increase each year by the highest of inflation, earnings growth or 2.5%.
This rise will push the new State Pension up to £12,535 a year, just £35 below the frozen personal allowance. While this sounds like good news, Lewis warned it means many pensioners could end up paying tax on their pension for the first time.
Sharing the figures with his followers on X, he wrote: “NEWS. The State Pension is set to rise 4.7% next April. We know this as it is ‘triple locked’, ie rises by the higher of 2.5% or inflation or average earnings rise. The final figure has just come in, for earnings up to July and it’s the highest of the three, at 4.7%.”
He broke it down further, adding: “NEW state pension £230.24 to £241.05/wk. OLD state pension (retirees pre Apr 2016) £176.45 to £184.75/wk. This will take someone on the full new state pension to £12,535 a year, only £35 below the frozen personal allowance.”
Lewis pointed out the obvious problem. “So as state pension income is taxable, that means without any question the following year (unless something changes), those on the full new state pension with no other income will for the first time pay tax on it (as it will rise a minimum 2.5% and personal allowances are frozen).”
For millions of pensioners, what sounds like a welcome pay rise could quickly become a tax headache, as frozen thresholds start to bite.
