State Pension ‘to hit £13,230 by 2029’ with rate of hikes to slow

The spending watchdog believes retirees will see their pay increase at less than half the pace seen in the previous five years.

Retirees will likely see their pay rise by 15% over the next five years, according to official forecasts.

The Office for Budget Responsibility (OBR) expects the State Pension to reach £254.42 a week by 2029.

That would see someone on the full State Pension receiving £13,230 a year (as first reported by This is Money).

While that might sound like good news, it’s worth noting this is less than half the increase seen over the last five years (31%).

In fact, pension pay has risen more in the last two years alone (19%).

Learn more about how State Pension increases are calculated

Tax bills coming?

Not only will retirees have to cope with more moderate increases to their pay, but many will also face tax bills for the first time.

As things stand, the point at which you start paying Income Tax is frozen at £12,570 until 2029.

Assuming the OBR forecast is correct, the State Pension will pay more than £13,000 by this date.

That means even those on the full State Pension with no other income will have exceeded this threshold and face a tax bill unless the Government pledges to make the pension exempt from Income Tax.