The Chancellor confirmed the anticipated increase for over-65s in her speech to Parliament, which also confirmed the triple lock will remain for the time Labour are at 10 Downing Street.
The triple lock mechanism guarantees the state pension rises each year by whichever is the biggest out of average earnings growth, the rate of inflation, or 2.5%.
Next April, the state pension will rise in line with earnings growth to 4.1%, while working-age benefits will also increase in line with the September 2024 Consumer Prices Index (CPI) measure of inflation of 1.7%.
The planned increase represents a boost for the new state pension from £221.20 to £230.30 per week, and for those who reached state pension age before 6 April 2016, there will be an increase from £169.50 to £176.45 per week.
It will hike the annual new state pension pot to £11,975.60 – a rise of £473 on its current level. The changes increase the annual basic state pension to £9,175.
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An added bonus for some of those above the state pension age will be the freezing of tax thresholds being thawed from April 2028.
This is because many pensioners are already close to the £12,570 tax threshold due to the brackets at which tax is paid remaining the same for basic-rate taxpayers since 2021.
However, as the Winter Fuel Payment was removed for up to 10 million pensioners, some experts have warned that even more retirees won’t feel the full benefit of the mooted pension increase.
‘Some may find pension increases lags behind 4.1%’
Steven Cameron, pensions director at Aegon, said: “A little-known rule is that any earnings-related element of the basic state pension, relating to the pre-April 2016 rules, and top-ups, are only increased in line with the rate of inflation and not the triple lock. Therefore, some may find their overall state pension increase lags behind the 4.1% figure.”
Mike Ambery, retirement savings director at Standard Life, said: “While the state pension is on the up, it’s worth remembering that it still falls short of the £14,400 a single pensioner needs for a minimum standard of living in retirement, according to the Pensions and Lifetime Savings Association.”
He added: “For our younger generations, one way to future-proof their retirement saving is to look at workplace or private pension provision and make sure to check it matches with their retirement expectations – there are a number of online tools and calculators that can help with this.”
