06/04/2024 |

Annual Pension Increases for 2024/25

Updated 06 April 2024 following confirmation of the Government Review Order and 2024/25 Personal Allowance.

Each individual member’s pension is made up of different parts. How much your individual pension will increase each year depends on how these different parts change.

The pension increases to BTPS members' pensions in payment, that apply from 1 April 2024, are published below. The increases detailed below apply to members’ increasing pensions, in excess of any Guaranteed Minimum Pension (GMP).

For members registered for our member portal, payslips will be available to produce online from 16 April. Register for the portal today and we'll email you to confirm when your payslip is online to view and download. Members who receive paper communications, will receive their individual payslip with their new payment amount in the post at the end of April.

The pension increases which are applied to your pension are governed by the Scheme Rules and legislation, which the Trustee is obliged to follow.

Sections A and B

The Scheme Rules determine that Section A and B members’ pensions are increased in the same way as public sector pensions, specifically, the Principal Civil Service Pension Scheme 1974.

Basis for the pension increase for any increasing pension in excess of GMP Percentage increase for 2024/25
Increases for members in Sections A and B of BTPS are currently based on the increase in the Consumer Prices Index (CPI) in the 12 months to September.  6.7%

Section C

Basis for the pension increase for any increasing pension in excess of GMP Percentage increase for 2024/25* 
The increase for members in Section C is currently based on the increase in the Retail Prices Index (RPI) in the 12 months to December. It is subject to a maximum increase in each year of 5 per cent.  5%
* If the start date of your pension was after 1 April 2023, your first pension increase will be proportionate to the number of complete months since that start date.

Not all of your pension receives this percentage increase

Your pension is made up of different components and different percentage increases apply to these different components. The rate of increase applied to each component is determined by a range of factors, such as the dates you were a contributing member, whether you chose a Pension Increase Exchange (PIE) option when you retired or as part of the special offer period in 2014 (which would mean part of your pension never increases), and whether you have a GMP and you've reached GMP age. If you retired within the last 12 months, the amount you receive is likely to be paid pro-rata as explained above.

Our 2024 Payslip Guides will be published before you receive your April payslip and will explain the rates that apply to these different components. You can also find more information about how pension increases are applied on our Payments page.

State Pension and Income Tax

The amount of Income Tax you pay depends on your total annual income from all sources. For example:

  • earnings (including the State Pension and any other pensions you are receiving),
  • profits from self-employment,
  • rental income,
  • bank or building society interest,
  • income from your investments (held outside of tax-efficient wrappers such as an ISA).

State Pension income is a taxable source of income but is usually paid without any tax being deducted.

You only pay Income Tax once your total annual income is above your Personal Allowance. The standard tax-free Personal Allowance for the tax year 2024/25 is £12,570.

Your eligibility for a Personal Allowance might depend on your tax residence status and/or nationality and the amount may be more or less than the standard figure due to a number of other factors. HMRC should tell you how much your Personal Allowance is each time it changes.

If your total annual income is more than your Personal Allowance, you’re liable to pay Income Tax on the amount that exceeds the Personal Allowance. Different rates of Income Tax apply, depending on where you live (Scottish rates/thresholds currently differ from the rest of the UK), the type of income and how much it is.

Tax isn’t deducted from the State Pension, as it uses up some of your standard Personal Allowance before other taxable income.

The government has confirmed the State Pension will rise by 8.5% from 6 April 2024. This means that for the 2024/25 tax year, the new maximum rate will be £221 per week, which equates to £11,492 per year.

This means that if you receive the full new State Pension, you will only have £1,078 (£12,570 less £11,492) of your standard Personal Allowance remaining for other taxable income, including your BTPS pension.

Therefore, if you receive the full new State Pension, and more than £1,078 per year (before tax) from your BTPS pension or other taxable income sources, you will tip over the Personal Allowance tax threshold and your BTPS pension is likely to be subject to Income Tax, with tax deducted at source (PAYE).

Please note that the Scheme cannot provide you with advice on your tax position and this is for information purposes only. The tax collected under PAYE may not perfectly match your final tax liability. So, you may still need to contact HMRC or file a tax return to pay (or obtain a refund of) the difference.

Please be aware that the new State Pension is payable to men born on or after 6 April 1951 and women born on or after 6 April 1953. For people born before these dates, you are likely to be receiving a combination of the basic State Pension and Additional State Pension, so values may differ.

HMRC and tax queries

If you have any queries about how your pension is taxed, or your current tax code, you will need to contact HMRC directly on the following number:

From the UK tel: 0300 200 3300

From overseas tel: +44 135 535 9022

You can set up a personal tax account with HMRC and check your own tax details. You’ll need a Government Gateway online account first. Find out more at gov.uk/personal-tax-account

HMRC can also chat with you online by going to tax.service.gov.uk/ask-hmrc/chat/paye

You can also download the HMRC app from their website by visiting gov.uk/guidance/download-the-hmrc-app

We are unable to contact HMRC on your behalf and we are only able to update your tax code on the instruction of HMRC. Any tax code instructions received from HMRC after our payroll cut off date (usually mid-month), would be applied for the following month’s payment.

Further guidance

You can access more information on tax and pensions from MoneyHelper, which is a free to use service, backed by government. You can visit moneyhelper.org.uk or contact them by phone on 0800 011 3797 (Monday to Friday 9am to 5pm excluding bank holidays), or +44 20 7932 5780 from overseas.

This news release aims to provide general information about your BTPS benefits. In the event of any conflict between this document and the BTPS Rules or legislation, the BTPS Rules and legislation take precedence.

Please be aware that the BTPS Rules and legislation are subject to change from time to time (including interpretation of legislation in light of new Court decisions). Relevant legislation and the way in which it affects your benefits (including the tax payable on your benefits) might change in future and may depend on your personal tax position.