The state pension has increased by an inflation-linked 10.1 per cent this month, giving retirees a boost to their income.

Many will be looking forward to their higher monthly allowance – but when will they receive it? i explains if the state pension is paid in arrears and how that could effect your finances.

How much is the state pension now?

The full new state pension is £203.85 per week. It has increased by 10.1 per cent under the triple lock, which says it will rise by whichever is highest out of 2.5 per cent, inflation or average earnings growth.

Although a welcome change, this is still not real-terms growth. That is because the increase is based on the inflation level in September last year. However, inflation currently sits at 10.4 per cent.

Is the state pension paid in arrears?

The state pension is paid four weeks in arrears – which means it is paid for the last four weeks, not the coming four weeks. This is similar to how many people in the workforce get their salary paid.

As it is paid in arrears, the first payment tends to be received within five weeks of a pensioner reaching state pension age, before switching to a four-week cycle.

Romi Savova, CEO of PensionBee, said: “Many pensioners may be unaware that their state pension isn’t immediately available on their 66th birthday, so the five-week waiting period may affect their finances in the short term.

“In addition, as the state pension payment is made for the previous period, rather than the upcoming month, it’s important for pensioners to take this into account when retirement planning to ensure they do not suffer from pension shortfall.”

Could this have an impact on when your pension is paid?

If pensioners are unaware of their state pension being paid in arrears, there is a risk they may have a month where they fall short on funds. However, hopefully this will be unlikely.

Tom Selby, pensions expert at AJ Bell, said: “In a worst case scenario, it is conceivably possible someone might be forced to take on high-cost debt to cover that income gap for a month. But in reality, most people will have at least some private pension or savings they can draw on as well as state pension.”

Is the state pension taxable?

It is taxable but paid before any tax is taken – which means that although tax isn’t deducted from the pension, it will use up some of your tax-free personal allowance.

In 2023/24, the standard tax-free personal allowance is £12,570. This means that if you receive the full new state pension, you’ll have £12,570 – £10,600.20 = £1,969.80 of your personal allowance remaining for other taxable income.

Examples of other taxable income include from employment or a private or occupational pension.

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