Millions of pensioners across the UK are facing a mix of good news and unwelcome surprises as new government changes take effect from June 2025. The Department for Work and Pensions (DWP) has confirmed increases to the State Pension, but these come with hidden financial impacts—especially for those born after 1951.
From frozen income tax thresholds to stricter benefit qualifications, pensioners will need to plan ahead to protect their income. If you’re retired or close to it, here’s everything you need to know.
Table of Contents
Summary
Let’s start with a snapshot of what’s changing:
| Change | Details | Start Date |
|---|---|---|
| State Pension Increase | New State Pension up to £230.25/week; Basic to £176.45/week | June 6, 2025 |
| Income Tax Threshold Frozen | Personal allowance frozen at £12,570 | Until 2028 |
| Winter Fuel Payment Means-Tested | Only those on Pension Credit will qualify | From winter 2025 |
| Underpaid Pensions Being Repaid | Over £800 million paid to 130,000+ pensioners | Ongoing |
| State Pension Age Rising | Increases to age 67 by 2028 | Starts May 6, 2026 |
While the 4.1% State Pension increase sounds like great news, many retirees will end up with less disposable income due to rising tax liability and reduced benefit eligibility.
PensionRise
Thanks to the triple lock, pensions increase annually by whichever is highest: inflation (CPI), wage growth, or 2.5%. For the 2025–2026 year, CPI inflation of 4.1% led the way.
- New State Pension: £230.25/week or £11,973 per year
- Basic State Pension: £176.45/week or £9,175 per year
This boost is welcome, but it brings thousands of pensioners dangerously close to crossing the income tax threshold, thanks to a freeze that hasn’t been updated in years.
TaxTrap
The personal income tax allowance remains frozen at £12,570 until 2028. That means even small private pensions or savings interest can now trigger tax charges.
Example:
Margaret, aged 70, receives:
- New State Pension: £11,973/year
- Occupational Pension: £1,500/year
Total Income: £13,473 → £903 over the tax-free limit
Tax Owed: 20% of £903 = £180.60
This tax burden didn’t exist for Margaret last year but now applies due to the frozen threshold. Nearly 1.6 million pensioners could be in a similar situation by 2026.
FuelCut
Starting in winter 2025, the Winter Fuel Payment will be means-tested. That means only those on benefits like Pension Credit will qualify.
Historically, this payment helped most older people with heating costs. Now, unless you’re on specific low-income support, you could lose hundreds of pounds annually—even if your income barely exceeds the benefit line.
Underpaid
The DWP has also admitted a long-running issue: pension underpayments. Over 130,000 pensioners, mostly women, were paid less than they were owed—sometimes for decades.
- £800 million+ already repaid
- Some have received back-payments averaging over £6,000
- Review continues through 2027, expected to hit £1.5 billion
If you think you were underpaid, especially if you’re a widow, married woman, or over 80, it’s worth checking.
Age Rise
The State Pension age is on the move again.
- From May 6, 2026, it begins rising from 66 to 67
- Full rollout by March 2028
- Future plans aim for age 68 by 2046
This affects when you can claim and how long you’ll need to rely on other income sources before retirement benefits kick in.
Action
Here’s a practical checklist to make the most of your finances:
1. Review your National Insurance record
Log into GOV.UK and check your NI years. You need at least 10 years for any pension and 35 years for the full amount.
2. Calculate your taxable income
Use HMRC’s free calculator to see if your income now exceeds £12,570.
3. Check for underpaid pensions
Use the LCP Pension Checker or contact the Pension Service directly if you believe you’ve been shortchanged.
4. Claim what you’re owed
Check if you qualify for Pension Credit, Council Tax Reduction, or Housing Benefit. Many people miss out simply by not applying.
5. Stay informed
Sign up for updates on the GOV.UK Pension News page to keep up with changes and deadlines.
June 2025 may be bringing a boost in State Pension, but it also marks a turning point. With tax thresholds frozen and benefits being trimmed, some pensioners may find themselves with less money than expected. Staying informed and proactive is the best way to protect your retirement income.
FAQs
When does the State Pension rise in 2025?
On June 6, 2025, by 4.1% under the triple lock.
Will I pay tax on my pension now?
You might if your income exceeds £12,570, which is now easier to do.
Is the Winter Fuel Payment ending?
No, but it will become means-tested from winter 2025.
Can I check for underpaid pension?
Yes, use LCP Pension Checker or contact the Pension Service.
When does State Pension age increase to 67?
Between May 2026 and March 2028.
