The UK new state pension could rise 8.5% to £221.20 per week (just over £11,500 a year) in April 2024, offering retirees an inflation-busting boost.
For those under the old state pension (those who’ve reached state pension age on or before 5 April 2016), it’ll increase to £169.50 per week, over £8,800 a year.
Thanks to the triple lock, the state pension should rise annually by either 2.5%, average earnings growth or inflation based on September’s figures, which was unchanged from the previous month at 6.7%.
As the highest of the above is average earnings growth of 8.5% in the three months to July, the state pension is likely to rise by this amount.
Why the state pension rise is yet to be confirmed
The government is yet to confirm the state pension rise, as there have been reports that ministers are considering adjusting the triple lock policy by looking at earnings, excluding bonuses.
If this measure is used, the state pension will rise by 7.8%. The government may push for this lower increase, arguing that NHS bonus payouts inflated earnings figures in July.
The government suspended the triple lock policy during the pandemic as earnings figures were distorted, so adjustments are possible, but the upcoming General Election may impact this decision.
“Provided the government sticks to its state pension triple-lock promise, the CPI figure should confirm an inflation-busting 8.5% increase for April next year,” said Tom Selby, head of retirement policy at AJ Bell.
“While that will cost the Treasury billions of pounds, it may be viewed as a price worth paying for prime minister Rishi Sunak given the proximity of the general election and with the Conservatives trailing Labour in the polls.”
While the rise in the state pension is good news for pensioners, the frozen personal allowance means more pensioners face a tax bill if their annual income exceeds £12,570.
As the state pension is set for another bumper increase, concerns about the affordability of the triple lock policy are once again in the spotlight, as well as whether it should be maintained.
While the state pension can offer some income in retirement, it’s worth having a decent pension pot so you can enjoy the retirement you want.
If you want to review your pensions or build a retirement plan, Unbiased can connect you with an FCA-regulated financial adviser.