Tax & rules 28 October 2026 5 min read

Autumn Budget 2026: State Pension rises to £13,036, and the new Pension Tax Allowance explained

Two retirement-related changes landed in today's Autumn Budget. The State Pension is going up 3.9% under the triple lock, pushing the full new State Pension to £13,036/year from April 2027. And because that figure now sits above the frozen £12,570 Personal Allowance, the chancellor introduced a new Pension Tax Allowance to keep pensioners whose only income is the State Pension out of the income-tax net. Here's what both changes mean for your plan, and how the Excelergy planner reflects them.

The State Pension rise: 3.9% to £13,036.40/year

The triple lock guarantees that the State Pension rises each April by the highest of CPI inflation, average earnings growth, or 2.5%. For April 2027 the binding figure was average earnings growth at 3.9%. The resulting rates:

• Full new State Pension (reached State Pension age on or after 6 April 2016): £250.70/week = £13,036.40/year. Up £488 from the current £12,548.40.
• Basic State Pension (reached SPA before 6 April 2016): £192.10/week = £9,989.20/year. Up £374.40 from the current £9,614.80.

The new rates take effect from the start of the 2027/28 tax year on 6 April 2027. If you're already drawing your State Pension, you'll see the uplift in your next payment after that date. If you're still working towards it, the figure in your gov.uk forecast will shift to reflect the new base.

The new Pension Tax Allowance: SP-only pensioners stay tax-free

Here's where it gets interesting. The Personal Allowance - the slice of annual income that's tax-free for everyone - has been frozen at £12,570 since April 2021 and stays frozen through to at least April 2028. Until now, the full new State Pension (£12,548) sat just inside the Personal Allowance, so a pensioner whose only income was the State Pension paid zero income tax. The 3.9% rise would have changed that: £13,036 is £466 above the frozen Personal Allowance, which under existing rules would have left SP-only pensioners facing a basic-rate tax bill of around £93/year.

The chancellor flagged this would be politically unacceptable and introduced a new Pension Tax Allowance, committed to running until at least 2030. The structural mechanics weren't fully spelled out in the Budget speech, but the stated outcome is clear: pensioners whose only income is up to the full new State Pension will not pay income tax.

The simplest mental model (and the one the Excelergy planner now uses) is that when you're drawing State Pension income, your effective tax-free threshold uplifts to cover the SP amount. For someone with £13,036 of SP and £0 of other income, that means £13,036 of effective allowance, which cancels the tax that would otherwise fall on the £466 of SP overshoot. For someone with SP plus other taxable income, the allowance still covers the SP overshoot, so other income starts getting taxed from the normal basic-rate band onwards - no double allowance, no new taper, no surprise tax trap.

What this means in practice for retirement plans

The headline direction of travel: the floor under UK retirement income rises again, modestly, and the new allowance stops the triple-lock rise accidentally pulling SP-only pensioners into tax.

• If you're relying mostly on State Pension, your real-terms income goes up slightly. A £488 nominal rise against ~3% CPI is a small real-terms gain.
• If you have DC pension drawdown on top of SP, the Pension Tax Allowance covers the SP overshoot but nothing more. Your DC income continues to be taxed above £12,570 - the uplift doesn't help you draw more tax-free from your pot.
• If you have DB income on top of SP, same picture - the extra allowance covers only the SP portion, so DB income is taxed from the normal band onwards.
• If you're still working, no change. The Pension Tax Allowance only applies when you're drawing State Pension.

What the Excelergy planner now does

The planner now runs with the 2027/28 figures by default:

• Default State Pension amount is £13,036/year, with the historical £12,548 figure in the migration list - open an old scenario and the planner will auto-bump the value and show a notice in the warnings tray.
• The tax engine applies the Pension Tax Allowance automatically in every year the person is drawing SP. The effective tax-free threshold for the tax calc becomes max(£12,570, state_pension_received).
• The tax-year badge on the planner now shows 2027/28, since that's where the simulated figures come from. The 2026/27 figures remain live until April 2027 but are only a few months of the typical retirement projection.

Caveats and open questions

A few things the Budget speech didn't fully pin down:

• The exact statutory mechanism for the new Pension Tax Allowance - is it a standalone allowance in the ITA 2007, a Personal Allowance uplift, or a non-savings-income extension? Could affect edge cases like high earners whose Personal Allowance tapers from £100,000.
• Whether the allowance interacts with Marriage Allowance. The planner currently treats them independently.
• What happens for pre-2016 Basic State Pension recipients (£9,989/year) - the allowance clearly isn't needed for them (they're already below Personal Allowance), but the policy wording was focused on the "new" State Pension.

We'll update this post as the Finance Bill clarifies these points. For now, the planner uses the simplest reasonable interpretation of what was announced, which gives the right answer for the great majority of users.