Retirees in receipt of the state pension are set to receive hundreds of pounds more from April as a key figure in the calculation has been confirmed. But will it actually go ahead?
The state pension is expected to rise by 8.5% in April 2024, adding £902.20 or £691.60 a year to payments for 12.6 million people, depending on when they retired.
For those who retired before April 2016 and who are in receipt of the basic state pension, the pay is expected to rise from £8,122.40 a year (£156.20 a week), to £8,814 (£169.50 a week). This is an extra £13.30 a week.
For those who retired after April 2016, the current state pension is £10,600.20 but this could rise £900 to £11,502.40 – £221.20 per week, up from £203.85, adding an extra £17.35 a week.
It comes as the Office for National Statistics (ONS) today confirmed that the earnings growth figure between May and July (total pay including bonuses) came in at 8.5%. Last month the ONS recorded 8.5% as a provisional estimate with today’s data finalising the figure.
This 8.5% figure is crucial as it forms part of a calculation to determine what retirees will receive in state pension payments each year.
The pension triple lock
It’s all to do with the pension triple lock, 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
- Or 2.5%
The one missing piece in the puzzle is the CPI measure of inflation which will be published tomorrow (Wednesday 18 October).
Based on the previous inflation figure of 6.7% in the year to August, Steve Webb, partner at LCP, said “it is inconceivable that the inflation figure would have risen enough in a month for this to be the highest of the three elements in the triple lock”.
However, the final hurdle for the second bumper state pension rise (10.1% last April) is for the Chancellor to give it the go ahead and stick to the Conservative manifesto pledge on the pension triple lock.
Webb said: “Today’s figures confirm that the Government’s manifesto commitment to the ‘triple lock’ on state pensions means that they should rise by 8.5% in April 2024. Although this will cost the Treasury more than £8bn, it is worth remembering that the UK still has one of the lowest state pensions in the western world and there is some way to go before the value of the pension recovers from a thirty-year period when it was linked only to price inflation. This increase will simply keep the rise in the state pension in line with the pay increases that many in work have enjoyed”.
Press reports last month suggested the Government is considering a one-off break from the triple lock in a bid to save the Treasury an estimated £1bn.
Related: Everything you need to know about the pension triple lock