State pension set to rise by ‘bumper’ four per cent next year
Those who receive the full state pension will see their weekly payments go up from £168.60 to £175.35, while anyone on the full old basic state pension will see an increase from £129.20 to £134.35.
Under current rules, the state pension is protected by the ‘triple lock’, which guarantees it goes up every year by whichever is highest out of inflation, earnings growth or 2.5 per cent.
Insurer Aegon says that earnings growth, which was four per cent in the year to July, the period used in the triple lock calculations, will be the highest figure when an announcement is made in mid-October.
This means pensioners are on track to receive a four per cent pay rise from April 2020.
The triple lock was introduced in 2010 as a way of making sure pensioners didn’t lag behind the working age population in terms of their state pension purchasing power.
It was first used to increase state pensions in April 2011 and since then, state pensioners have done well from the triple lock with overall increases outstripping both price inflation and earnings growth.
A single person receiving the old basic state pension, which was £97.65 back in April 2010 is now receiving £129.20, an increase of 32 per cent while prices have increased by 24 per cent and average earnings by only 20 per cent, according to analysis by Aegon.
The current government has committed to continue the triple lock until 2022.
Steven Cameron, pensions director at Aegon, said: “Based on the latest earnings growth figures, it looks like state pensioners can look forward to an inflation busting 4% increase in their state pension from next April.
“This will be welcome news for current state pensioners.
“However, these inflation busting increases do come at a significant cost. The state pension is not funded in advance so pensions are funded on a ‘pay as you go’ basis from today’s workers’ National Insurance contributions.
“With the prospect of an early General Election, it will be interesting to see where each party stands on commitments to retaining the triple lock for the next five years.”