A triple lock boost could hand pensioners almost £500 extra per year (Image: Getty)
New state pensioners aged 77 and under across the UK are set to receive an annual payment boost of around £488 under Andy Burnham’s Government from next April.
The extra cash is set to come from the increase to State Pension rates, which increase in line with the triple lock at the start of each new tax year on April 6. The triple lock is a UK Government guarantee that the State Pension will rise every April by whichever is the highest out of three key measures: the consumer price index (CPI) measure of inflation (measured for September the year before), average wage growth between May and July the previous year, or 2.5%.
The latest figures from the Office for National Statistics (ONS) showed total wage growth, including bonuses, stood at 3.9% in the quarter to July, down from 4.2% in the three months to June. As this sits above the 2.5% minimum floor increase, early forecasts suggest that this 3.9% average earnings figure is likely to drive next year’s State Pension triple lock increase.
Of course, these figures are subject to revision, and the final piece of the triple lock puzzle won’t come until inflation figures for September are published in October.
According to the ONS, CPI inflation increased to 3.1% in August, compared with 2.9% in July, and while economists are predicting that it will continue to rise over the coming months, unless it goes above 3.9%, the average wage growth figure will be used to set next year’s State Pension rates.
If earnings growth is confirmed at 3.9%, this would take the full new State Pension to £250.70 per week, up from £241.30. Over a full year, this would give pensioners an annual boost of £488.80 if they’re eligible for the maximum amount.
This would affect new state pensioners who reached State Pension age from April 6, 2016, when the qualifying age was set at 63 to 65. This later continued to rise to age 66, meaning new state pensioners will now all be aged under 77.
As for the full basic State Pension, which is given to men born before April 6, 1951, and women born before April 6, 1953, a 3.9% increase would take rates to £192.10 per week, up from £184.90, giving pensioners entitled to the full amount an annual boost of £374.40.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “According to the ONS, average wage growth stood at 3.9%. We may have just over a month to wait until the relevant inflation figure is published, but it currently stands at 2.9%, so unless there’s a real surge it seems likely that the average wage figure will be used.
“Such an increase would put someone on the full new State Pension on course to receive £250.70 a week from next April – up from the current £241.30 per week. Someone on a full basic state pension would receive £192.10 a week – up from £184.90.
“This will be a welcome boost to pensioner incomes but even a full State Pension is only ever going to cover the basics. If you want to live well in retirement, then you will need to take your pension planning into your own hands.”
As the personal tax allowance has been frozen at £12,570 since 2021, it means state pensioners will be caught within the tax net for the first time.
So far, the Government has said pensioners who are wholly dependent on the new State Pension – with no private pension – or the old basic State Pension, “with no increments”, will not have to pay tax.
It’s still unclear exactly how the policy will work, but the Government is expected to set out further details in the Budget on October 28.
Minister for Pensions Torsten Bell said: “In line with the commitment made at Budget 2025, pensioners who only just exceed the personal allowance will not have the administrative burden of paying small amounts of tax in this Parliament. The Chancellor will set out further details on how that commitment will be delivered at the Budget.”
