The state pension is expected to rise in April next year, following an almost record-breaking growth in average annual earnings of 8.5%. And it’s all down to the ‘triple lock’. But what is this and what does it mean for your pension?
The state pension is expected to rise considerably in April 2024, following an almost record-breaking growth in average annual earnings of 8.5%. And it’s all down to the ‘triple lock’.
The triple lock is a system that was introduced by the government in 2011 to ensure the state pension kept up with inflation and the rising cost of living. It applies to the new state pension (post-April 2016) and the basic state pension (pre-April 2016), and is based on three measures:
The state pension increases in April every year by whichever of the three measures is the highest. The latest measure for ‘average annual earnings’ was released in September this year and came in highest at 8.5%, so the state pension will increase by that amount in April 2024.
When the rise is applied, the full new state pension will go from £203.85 per week to £221.20 per week (£10,600.20 to £11,501 per year). The basic state pension will rise from £156.20 per week to £169.50 per week (£8,122.40 to £8,812.80 per year).
Despite the old adage that good things come in threes, there have been calls to scrap the triple lock amidst concerns it’s too expensive to run – especially over the long term. According to the Institute of Fiscal Studies, it costs around £11bn per year and could cost up to £45bn by the year 2050.
Last year alone, it cost the government £124bn in state pension rises after the average annual earnings measured 10.1%. It’s also resulted in millions of pensioners having to pay more income tax, and triggered discussions about the unfairness of younger generations having to fund the annual increases.
The Prime Minister, Rishi Sunak, has confirmed that the triple lock isn’t going anywhere for the time being, despite criticism that around 60% of welfare payments in the UK go to pensioners. It’s been supported by the opposition too, including the Labour Party, which means retirees on the state pension could continue to enjoy more increases in the future.