The state pension will increase by 8.5% from April 2024, the Chancellor has confirmed.
In his Autumn Statement to the House of Commons today (22 November), Jeremy Hunt, the Chancellor of the Exchequer, confirmed that pensioners will see their payments increase in line with wage growth thanks to the triple lock.
That’s despite speculation that the government may attempt to impose a smaller increase in order to reduce the costs of the measure.
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Here's what to expect from the state pension in 2024 under the triple lock regime.
How does the state pension triple lock work?
The state pension triple lock is designed to give pensioners a tangible increase to their income each year.
It was introduced by the Coalition government, and ensures that each April the state pension increases by the largest of the following three measures:
- The rate of inflation (using the consumer price index measurement from October)
- The rate of wage growth (in the three months to July)
The figure for wage growth for the three months to July came to 8.5%, higher than the 6.7% for inflation announced in October.
There had been speculation that the government might try to introduce a smaller increase, since the 8.5% wage growth figure was based on increases to total pay, so includes bonuses. The suggestion had been that the government could attempt to pay 7.8%, which was the increase in regular pay, excluding bonuses.
This would have saved the Treasury around £900 million a year, but the Chancellor has opted against pursuing it
What will the state pension be worth in 2024?
The amount you get from the state pension will depend on whether you qualify for the basic state pension or the new state pension, as well as your National Insurance record.
If you get the full basic state pension, then payments will increase by £13.30 per week. That means growing from £156.20 to £169.50.
Meanwhile the full new state pension will move from £203.85 to £221.20, an increase of £17.35 per week.
It comes after a 10.1% increase to the state pension from April 2023.
Is the state pension triple lock sustainable?
There have long been calls for reform of the state pension triple lock, given the sizeable increases pensioners have enjoyed over recent years.
Jon Greer, head of retirement policy at Quilter, suggested that the problems associated with the triple lock have been “punted down the road for the next government to think about”.
He added: “A more sustainable approach could involve linking pensions to a fixed percentage of average earnings. This method would align pension increases with the economic prosperity of the country, ensuring that pensioners' incomes grow in tandem with the working population.
“It also offers more predictability for budgetary planning and could be perceived as a fairer system, especially for younger generations who currently contribute to the pensions of retirees.”
In addition, increases to the state pension push more pensioners towards having to pay income tax on their earnings.
Kevan Ramanauckis, pensions technical specialist at Canada Life, said that someone in receipt of the full state pension is now just £1,000 away from paying income tax, even if they have no other source of income.
“Pensioners in the old state pension scheme and even some in the new system may find themselves being drawn into the income tax net for the first time,” he added.
John Fitzsimons has been writing about finance since 2007, and is a former editor of Mortgage Solutions and loveMONEY. Since going freelance in 2016 he has written for publications including The Sunday Times, The Mirror, The Sun, The Daily Mail and Forbes, and is committed to helping readers make more informed decisions about their money.
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