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Autumn Statement 2023: Pensions triple lock to stay at an inflation-busting 8.5%

Autumn Statement 2023: Pensions triple lock to stay at an inflation-busting 8.5%
Emma Lunn
Written By:
Emma Lunn
Posted:
22/11/2023
Updated:
27/11/2023

Retirees will receive an inflation-busting 8.5% state pension boost from April next year, chancellor Jeremy Hunt has announced.

Confirmation the ‘triple-lock’ will be honoured follows rumours the Treasury was considering using a lower measure of average earnings that excludes bonuses to save cash.

But Hunt confirmed in today’s Autumn Statement the triple lock will stay.

As a result of the 8.5% increase revealed today, the ‘old’ state pension (paid to those who reached state pension age before 6 April 2016) will increase from £156.20 a week to £169.50 per week (£8,814 a year)

The ‘new’ state pension will increase from £203.85 a week to £221.20 a week (£11,502.40 a year).

If the Government had opted to instead use the average earnings growth figure that strips out bonuses, which came in at 7.8% in July, the old state pension would have risen to £168.40 per week and the new state pension to £219.75 per week.

What is the pensions triple lock?

The pension triple lock is a mechanism by which the state pension is uplifted for the millions of people in retirement.

It guarantees that the state pension rises each year by the highest of:

  • Average earnings growth between May and July (total pay including bonuses)
  • Consumer Prices Index (CPI) measure of inflation in the year to September, published in October by the ONS (6.7% for this year)
  • or 2.5%

The guarantee aims to ensure that pensioners, particularly those who rely on the state pension as their only source of income, could afford the cost of living and keep pace with inflation and rising wages.

What do pensions experts say?

Jamie Jenkins, director of policy Royal London, said: “The triple lock has proved a lifeline for pensioners struggling to keep their heads above water amid the greatest cost of living shock in modern times. In committing to an 8.5% hike, the Chancellor has honoured the Government’s pledge and offered reassurance to millions that they will be able to stay ahead of the inflation curve for the short term at least.

“We now need a sensible plan for what it is trying to achieve, and what will replace it once we agree that the State Pension has reached a reasonable level.”

Tom Selby, head of retirement policy at AJ Bell, said: “With CPI inflation now at 4.6% and anticipated to continue falling into 2024, today’s announcement represents a serious boost in spending power for millions of pensioners.

“There had been suggestions the Treasury was considering arguing NHS bonus payouts had inflated July’s earnings figure and instead opt for the lower 7.8% figure, which strips out bonuses. This could have saved the Exchequer somewhere in the region of £1 billion but would also have left the chancellor open to the accusation of shifting the state pension goalposts.

“Given where the Conservatives find themselves in the polls and the fact older people hold huge sway at the ballot box, it is hardly surprising they opted to target fiscal restraint elsewhere.”