Conservatives predict state pension will hit £13,200 by 2029

The triple lock will boost the state pension to £13,200 a year in five years’ time, according to predictions in the Conservative manifesto.

The new state pension currently pays out £11,502 annually (£221.20 a week) for those who qualify for the full amount.

It rises each year with the triple lock: wage growth, inflation or 2.5%, whichever is highest. And the main political parties - Lib Dems, Labour and the Conservatives - have all pledged to keep the triple lock mechanism if they win the next election. 

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The Tories have gone one step further and unveiled “triple lock plus”, which would hike the tax-free personal allowance for pensioners by the triple lock each year, cutting the amount of income tax that retirees pay.

But the Conservative manifesto also revealed how much it expects the state pension to rise each year as a result of the triple lock.

We look at the figures, and how the triple lock will boost the state pension in future - especially given inflation is falling. Today inflation hit 2% in the 12 months to May, the lowest level in almost three years.

What are the Conservative forecasts for the state pension?

The Tories re-confirmed their commitment to the triple lock when they launched their manifesto last week. The party also published a forecast of how the triple lock would increase the state pension. 

The manifesto said that they would “continue to uprate the state pension in line with the highest of prices, earnings or 2.5%. On current forecasts, this will mean the new state pension increases by a further £430 in April next year to £11,970; and increases by £1,685 a year to £13,200 by the end of the parliament.”

Let’s drill down into these predictions. How did the Tories arrive at a figure of £11,970 a year for a full new state pension next year? 

Steven Cameron, pensions director at Aegon, thinks that the state pension rise will be based on wage growth next April. “Given today’s announcement that inflation sat at 2.0% for May, it’s very likely the triple lock will be based on earnings growth. This currently stands at 5.9%, but it’s the figure published in September which is used, and the implied manifesto expectation is this will fall to 3.7% by then.”

In terms of the eventual rise to £13,200 by 2029, Aegon calculations show that this means the Conservatives are assuming the minimum 2.5% increase in the following four years:

“In other words, current forecasts are that both inflation and earnings growth will not exceed the 2.5% per year guaranteed increase over this period”, notes Cameron.

Of course, if they do exceed 2.5%, pensioners will enjoy a larger increase to their state payouts. 

The state pension soared by 10.1% last April, the highest ever increase (based on the consumer prices index measure of inflation in September 2022). In April this year, pensioners enjoyed another bumper boost of 8.5% (in line with earnings growth).

Cameron says these increases were due to inflation and earnings growth skyrocketing in exceptional circumstances. He adds that the Conservatives’ predictions indicate a “return to more typical triple lock increases, which still allow state pensioners to at least retain their purchasing power.”

Do the state pension predictions look realistic?

The state pension forecast tallies with predictions put out earlier this year by the investment platform AJ Bell.

It thinks the UK state pension could rise to £13,236.10 by April 2029 (or £254.54 a week), thanks to the triple lock.

This forecast assumes earnings data dominates the next two triple locks, before 2.5% is used to uprate the state pension over the following three years. 

AJ Bell’s estimates are based on Bank of England forecasts for inflation and wages up to 2027/28, after which it assumes both percentages will sit at 2%.

The triple lock is a popular policy with older voters. According to a survey by My Pension Expert of 1,295 UK adults over 40, more than half (51%) say a political party’s commitment to maintaining the triple lock would significantly influence their voting intentions at the next general election. 

More than half (57%) also feel that if the state pension triple lock was scrapped it would be damaging to their financial plans for retirement.

However, critics say the policy is aimless, and vulnerable to big increases that are out of kilter with the rest of the population. It is also becoming increasingly expensive - and unaffordable. 

Tom Selby, director of public policy at AJ Bell, argued: “As the real value of the state pension rises as a result of the triple lock, it also increases the likelihood of planned state pension age hikes being accelerated to balance the books, creating both uncertainty and the potential for intergenerational unfairness.”