State Pension set to rise by 8.5%

Retirees are set to receive a 8.5% increase to their State Pension from April next year as CPI inflation held steady at 6.7% for the year ending September. As a result, seasonally adjusted pay growth for the three months to July, which came in at 8.5% this year, should be applied to the state pension from April 2024. Assuming the Triple Lock is maintained and July’s earnings growth figure is used, the State Pension figures for the ‘old’ State Pension (paid to those who reached state pension age before 6 April 2016) will increase from £156.20 per week to £169.50 per week (£8,814 per year) This would also see an increase in the ‘new’ state pension from £203.85 per week to £221.20 per week (£11,502.40 per year). Tom Selby, head of retirement policy at platform and SIPP provider AJ Bell, said today’s CPI figure puts more pressure on Prime Minister Rishi Sunak’s promise to maintain the Triple Lock. He said: “Provided the government sticks to its state pension Triple-Lock promise, today’s CPI figure should confirm an inflation-busting 8.5% increase for April next year. While that will cost the Treasury billions of pounds, it may be viewed as a price worth paying for Prime Minister Rishi Sunak given the proximity of the general election and with the Conservatives trailing Labour in the polls. “It is possible the Treasury will argue NHS bonus payouts inflated July’s earnings and so instead opt for the lower 7.8% figure, which strips out bonuses. This would allow the Government to claim it has stuck with the triple-lock pledge while saving some cash, although it would inevitably face accusations of a stealth attack on pensioner incomes. “It may well take an independent review with cross-party support to break the hold the Triple-Lock has on discussion about the future of the State Pension. Politicians need to be brave enough to kick-off an honest conversation about what the State Pension is aiming to deliver in retirement, how it should look over the long-term and the associated costs. Without that, we risk remaining in a Triple-Lock-induced doom loop where the only real question is whether or not that policy will be retained.” Steven Cameron, pensions director at Aegon, agreed that a debate around the State Pension and the future of the Triple Lock is required. He said: “Today’s official figures from the Office for National Statistics showing year-to-September inflation of 6.7% has turned the heat up ahead of the Government’s official announcement, due next month, of next April’s State Pension Triple Lock. All signs point to a bumper year for State Pensioners, but coming at considerable cost to today’s workers. “While an 8.5% increase would be welcome news for State Pensioners’ purchasing power, it would do little to quieten the growing concerns that the Triple Lock in its current form is unsustainable longer term. With the burden on current workers who pay for the State Pension through National Insurance increasing sharply, even if the Government refrains from fiddling with the figures this time round, today’s inflation figure will only amplify calls for whoever is in power after the general election to review the Triple Lock to make it intergenerationally fair.”

State Pension set to rise by 8.5%

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