The state pension boost will see the ‘old’ basic state pension rise by £5.05 a week to £134.25, while the ‘new’ state pension will increase by £6.60 a week to £175.20.

The bumper increase comes after the September inflation figure was confirmed at 1.7 per cent. Under the state pension triple lock, annual payments increase by the highest of average earnings in July, CPI inflation in September, or 2.5 per cent.

Average weekly earnings rose by 3.9 per cent in the year to May to July – so this is the rate used to calculate state pension increases.

Andrew Tully, technical director at Canada Life, said: “The increase to state pensions will be a very welcome above-inflation boost for the many retirees who are looking to balance household budgets.

“This is the third highest increase in the new state pension since the triple lock guarantee was introduced and the third time the state pension has been increased by wage growth. This increase does cast a spotlight on the long-term sustainability of the triple lock although government has committed to it in this parliament or until 2022, whichever comes sooner.”

Rise in lifetime allowance

September’s CPI figure also dictates what next tax year’s Lifetime Allowance will be.

The Lifetime Allowance is a limit on the amount of pension benefit that can be drawn from pension schemes – whether lump sums or retirement income – and can be paid without triggering an extra tax charge.

Michael Martin, private client manager at 7IM, said: “Today’s number means that from April 2020, the Lifetime Allowance will be £1,072,935. While this will be a welcome increase, many people, including myself would like to see the LTA scrapped because it penalises those who save prudently and invest well by taxing them heavily when they breach the allowance.”

The Lifetime Allowance was introduced in April 2006 as a measure to restrict the overall value of pension savings. It was set at £1.5m in tax year 2006/07 and increased annually to a high of £1.8m in 2010 to 2012. The allowance has been reduced over subsequent tax years to a current £1.055m.