People on the New State Pension now receive up to £203.85 each week and those on the Basic State Pension get up to £156.20, following the UK Government’s annual uprating in April. However, new estimations from pensions and personal finance experts at Broadstone, indicate that another significant increase could be on the way for Britain’s 12.6 million pensioners next year - if inflation continues to decrease at its current rate.
The Consumer Price Index (CPI) for May remained unchanged at 8.7% and if it stays hovering around 8% for the September CPI - the inflation rate used under the Triple Lock guarantee - annual New State Pension payments in 2024 would rise by £848 to £11,448 and even if inflation drops to 6% it would still drive a £636 increase.
The Triple Lock determines the level of uprating for the State Pension and pays the highest between September’s CPI inflation rate, earnings growth, or 2.5%.
The Triple Lock forms part of the Conservative Party manifesto and with a General Election looming next year, it seems unlikely the UK Government would tamper with the Triple Lock as it may put off older voters - however, nothing in politics is a certainty.
Damon Hopkins, Head of DC Workplace Savings at Broadstone, said: “Having benefited from around a £1,000 increase to their State Pension this year, another substantial Triple Lock hike will further embed its importance to the retirement income of millions of pensioners - present and future.
“Given the delicate state of the Uk Government’s finances it will raise further questions around the viability of the Triple Lock. That said, it would take a brave Prime Minister to break a key manifesto pledge for the second time in three years so close to a General Election.”
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, also warns that scrutiny of the State Pension could intensify and the Triple Lock may fall under the spotlight as UK Government expenditure on the contributory benefit is forecast to surge in the next five years.
The latest expenditure figures from the Department for Work and Pensions (DWP) show that the State Pension cost the UK Government an estimated £112.5 billion to deliver in 2022/23 and is forecast to rise to £139.5 bn in 2027/28, in real terms. However, in nominal terms the estimated increase is more - from £109.7bn to £147.2bn.
Ms Morrissey said: “State Pension costs are surging with the UK Government predicting eye-watering increases over the next five years. Around 12.6m people are claiming the State Pension with this number expected to surge past 13m in just five years, all thanks to the fact we are living longer. This is great news but undoubtedly puts real pressure on the smaller working population who shoulder the cost.”
The UK Government recently decided to postpone an increase in State Pension age to 68 on the basis of increases in longevity slowing down.
Ms Morrissey agrees this is “fair” adding that there is a very real prospect that “many people simply are not able to keep working until their late 60s”.
She said that the real problem remains on how to contain these burgeoning costs. Ms Morrissey continued: “We will likely see the decision revisited after the election [in 2024] and so could see further changes to State Pension age, but the role of the Triple Lock is also likely to come under the spotlight.
“Brought in over a decade ago to make sure pensioners received decent State Pension increases, the Triple Lock has also been criticised in recent years for being intergenerationally unfair. The time has come for a review of the State Pension and the Triple Lock’s role within it to make sure it remains fit for purpose.”
The statistics also suggest that the number of people claiming Pension Credit will decrease over time as more people will qualify for the full New State Pension. - by 2027/28 there will be an estimated 1.15m claimants - there are currently 1.4m.
Estimated State Pension payments from April 2024
The estimated calculations from Broadstone show the current annual rates for the full New and Basic State Pensions.
How much someone receives depends on the number of years worth of National Insurance contributions, around 35 is needed for the full New State Pension, but this may be more if you were contracted out - find out more here.
Current Annual Full New State Pension - £10,600
8% inflation - £11,448 (up £848)
- Weekly: £220
- Monthly: £880
7% inflation - £11,342 (up £742)
- Weekly: £218
- Monthly: £872
6% inflation - £11,236 (up £636)
- Weekly: £216
- Monthly: £864
5% inflation - £11,130 (up £530)
- Weekly: £214
- Monthly: £856
4% inflation - £11,024 (up £424)
- Weekly: £212
- Monthly: £848
3% inflation - £10,918 (up £318)
- Weekly: £210
- Monthly: £840
Current Annual Full Basic State Pension - £8,122
8% inflation - £8,772 (up £650)
- Weekly: £168
- Monthly: £675
7% inflation - £8,691 (up £569)
- Weekly: £167
- Monthly: £658
6% inflation - £8,609 (up £487)
- Weekly: £165
- Monthly: £662
5% inflation - £8,528 (up £406)
- Weekly: £164
- Monthly: £656
4% inflation - £8,447 (up £325)
- Weekly: £162
- Monthly: £650
3% inflation - £8,366 (up £244)
- Weekly: £161
- Monthly: £643
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