Wise-Compare.com: Empowering Wise Decisions.

The triple lock pledge means the state pension should increase every year by the highest of inflation, average earnings growth or 2.5 per cent.

Current high wage growth means the triple lock should deliver an 8.5 per cent boost to the state pension from April 2024.

The earnings growth figure used for the triple lock was reported by the ONS at 8.5 per cent, while the September CPI inflation number that is used has been revealed as 6.7 per cent.

With wage rises above inflation, the earnings growth figure should decide the state pension rise.

The state pension is due an 8.5% or £902 annual boost thanks to the triple lock pledge

How much should the state pension rise by?

Calculations by investment platform AJ Bell show: 

An increase in the old state pension from £156.20 per week to £169.50 per week – or £691.60 annually.
 An increase in the new state pension from £203.85 per week to £221.20 per week – or £902.20 annually. 

How is the triple lock calculated? 

The crunch CPI inflation rate figure used in the calculation is taken from September, and was published on 18 October 2023, coming in at 6.7 per cent.

The key earnings growth figure, for total pay including bonuses, is for the three months to July, and published in September. It was revealed as 8.5 per cent in September 2023.

> State pension triple lock will drag 650,000 more into tax net 

What has happened to the triple lock recently? 

Last autumn, the inflation rate was 10.1 per cent, which prompted a hike in the full rate state pension to £203.85 a week or £10,600 a year from April 2023.

The triple lock was introduced by David Cameron’s Government in April 2012, to ensure pensioners receive a decent rise in income every year.

But it has become mired in controversy, even though both the Conservatives and Labour have promised to stick to it in the next general election.

The Government sparked fury by scrapping the earnings element from the state pension rise in April 2022, because wage growth was temporarily distorted to more than 8 per cent due to the pandemic.

Instead, pensioners received a meagre 3.1 per cent hike, using the inflation figure from the previous autumn before it started to soar.

The Government has promised to keep the triple lock pledge again for next year, and is likely to honour this with an election looming.

How much is the state pension?

The 10.1 per cent inflation hike last April means pensioners receiving the post-2016 full rate state pension get £203.85 a week or £10,600 a year.

Those on the basic rate get £156.20 a week or £8,120 a year.

Our pensions columnist Steve Webb explains here how different elements of the state pension were raised, such as graduated and SERPS (the second state pension, for those who earned it in the past).

Why is the triple lock controversial? 

Critics point out that maintaining the triple lock is expensive when public finances are in a straitened state, and some question whether the elderly should get a bumper state pension increase when workers are handed below inflation pay deals.

Supporters say that unlike with the temporary wage growth spike after the pandemic, pensioners are currently struggling with the very real challenge of high inflation while on a fixed income.

Many depend solely on the stage pension, and are having a tough time paying sky-high food and energy bills.

The UK also has the lowest state pension among rich countries based on one of the most cited international measures, although that does not tell the whole story because some nations roll their state and workplace pensions into one system.

Aside from the moral case and fairness argument in favour of a full hike, elderly people tend to vote in high numbers.

The Conservatives will not have wanted to upset this key voting bloc by denying them a triple lock increase for the second year running.

How much is the state pension? 

The full flat rate state pension is £203.85 a week or an annual £10,600.

People who retired before April 2016 on a full basic state pension receive £156.20 a week or £8,120 a year.

The old basic rate is topped up by additional state pension entitlements – S2P and Serps – if they were earned during working years.

People who have contracted out of S2P and Serps to pay less National Insurance over the years and retire after April 2016 might get less than the full new state pension. 

Workers now need to have 35 years of contributions to get the new flat rate state pension, compared with 30 years of qualifying National Insurance contributions to get the old state pension.

But even if you paid in full for a whole 35 years or more, if you contracted out for some years it might still reduce what you get. 

Everyone gets the option of deferring their state pension to get more in their later years and you can buy state pension top-ups to fill in gaps.

Content source – www.soundhealthandlastingwealth.com

Leave a Reply

Your email address will not be published. Required fields are marked *