DWP State Pension set to rise to £935 each month from next April

-Credit: (Image: Stoke Sentinel)
-Credit: (Image: Stoke Sentinel)

The Office for National Statistics (ONS) has explained that UK inflation plummeted to its lowest point in nearly three years this April. The Consumer Price Index (CPI) inflation rate fell to 2.3 per cent, a substantial decrease from March's 3.2 per cent.

This is the lowest it's been since July 2021 when inflation was recorded at 2 per cent, which aligns with the Bank of England's target level. State Pensioners across Great Britain, numbering nearly 12.7 million, are being advised to monitor the CPI as it forms part of the Triple Lock calculating method. This measure determines the annual uprating for the contributory benefit.

The Triple Lock measure ensures that State Pensions increase each year in line with whichever is the highest of average annual earnings growth from May to July, CPI in the year to September or 2.5 per cent. Current figures show the earnings growth at 5.7 per cent for January to March, 2024.

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In April, the New and Basic State Pensions saw an increase of 8.5 per cent. This means someone on the full New State Pension will receive £221.20, or £884.80 every four-week pay period during the 2024/25 financial year, reports the Daily Record.

Those on the full Basic State Pension will receive £169.50 each week, or £678 every four-week pay period.

Steven Cameron, Pensions Director at Aegon, discussed the potential implications of a 2.3 per cent inflation figure on the State Pension Triple Lock. He suggested that it could lead to a projected rise in payments by 5.7 per cent next spring.

He expressed his view: "For the April 2024 increase, earnings growth in 2023 produced an inflation-busting 8.5 per cent increase. In April 2023, a spike in inflation the previous year led to a record-breaking 10.1 per cent boost to the State Pension. These increases and the underlying high volatility that was present in both price inflation and earnings growth, have since raised serious questions over longer-term affordability of the State Pension, which is paid for by today's workers through National Insurance Contributions."

Elaborating more on this, he added: "With inflation now below the 2.5 per cent underpin, it's likely to be earnings growth that determines next year's Triple Lock increase, as the latest figures have this sitting at 5.7 per cent (for January to March 2024)."

Cameron reiterated how this process would work, saying: "The specific figure used for determining the Triple Lock will be the year-on-year increase in earnings for the period ending May to July 2024, which will be published in September. Unless there's a significant drop in earnings growth over the next few months, this figure will likely determine next year's Triple Lock."

The Triple Lock's determination seems primarily influenced by the current earnings growth rate, standing at 5.7 per cent. Nonetheless, this figure is subject to changes and will not necessarily be the decisive metric for uprating levels.

It can be expected that the next instalment of CPI figures will be released by the ONS on June 18. The forecasted increase in state pension could see beneficiaries receiving a boost of 5.7 per cent on existing amounts.

A 5.7 per cent increase on the current State Pension would see people receive:

  • Full New State Pension - £233.80 each week, £935.20 every 4-week pay period, £12,157.60 over the 2025/26 financial year

  • Full Basic State Pension - £178.40 each week, £713.60 every 4-week pay period, £9,276.80 over the 2025/26 financial year

Steven expressed: "If price inflation stays low and earnings growth also gradually falls back to levels more typical of the last decade, then the State Pension Triple Lock formula may produce more predictable and affordable increases."

He further clarified that this could make it easier for succeeding administrations to commit to keeping the Triple Lock for an additional five years. This might lead to lesser rates of increase, yet providing pensioners the ability to keep up their living standards during periods of lower inflation.

Steven proposed: "However, rather than a three-way comparison year on year, we'd recommend averaging the earnings component over a three-year period, which could smooth out excessive volatility and help ensure intergenerational fairness."

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