For retirees in receipt of the full ‘new’ state pension (from 6 April 2016), weekly earnings will rise from £221.20 (£11,502 per year) to £230.05 (£11,963 per year).
For those who reached the state pension age before 6 April 2016 and who are on the ‘basic’ state pension, payments will increase from £169.50 per week (£8,814 per year) to £176.30 (£9,168 annually).
It’s all down to the average earnings growth figure for the months of May, June and July 2024, which was confirmed by the Office for National Statistics (ONS) as 4%.
It means millions of retirees are set to see an inflation-busting increase, thanks to Labour’s commitment to continue with the pension triple lock.
Under the mechanism, it allows for pensioners to receive an annual increase equal to the highest of price inflation, earnings growth, or a minimum rate of 2.5%.
Inflation has come down to 2.2%, but the figure used for the pension triple lock is for the year to September, which will be published in October by the ONS. Only if inflation were to jump above 4%, retirees could expect to see a higher state pension increase. See YourMoney.com’s Guide to the pension triple lock for more information.
Triple lock commitment but U-turn urged on Winter Fuel Payment
Rachel Vahey, head of public policy at AJ Bell, said: “Sticking with its triple lock promise may help redeem the Government in the eyes of UK pensioners”.
Vahey said: “The Government is coming under more intensive pressure to ‘U-turn’ on its controversial decision to axe the Winter Fuel Payment (WFP) for all pensioners, except those who claim Pension Credit. And although the increase to the state pension should help meet next year’s bills, it doesn’t help those who will be living close to the edge of their means this winter.”
According to AJ Bell, the state pension has been boosted by 28% over the last four years.
However, as it nudges closer to the frozen personal allowance of £12,570, drawing more people of state pension age into paying tax on their pension, and with the concept of the universal WFP coming under increasing scrutiny, “the Government will have to take the bull by the horns at some point to address who should get the state pension, at what age, and how much”, she added.
Jon Greer, head of retirement policy at Quilter, said with income tax thresholds frozen, some pensioners relying solely on the state pension “may soon be in the absurd position of needing to pay a portion of it back in income tax”.
Pensioners receiving the full new state pension now only need an extra income of £607 per year before their personal allowance is used up in full.
Greer said: “As the Government’s upcoming pension review examines the adequacy of both state and private pensions, this could be the moment for a balanced, long-term strategy that aims to get cross-party support. A consensus on the appropriate level of the state pension and a fair mechanism for maintaining its value over time is essential to prevent annual increases from becoming political flashpoints.
“While the 4% increase is positive for pensioners, the broader conversation on the triple lock’s future must continue. The upcoming review may be key to finding a sustainable path forward that depoliticises the process and ensures fairness across generations.”
