New State Pension claimants could be owed up to £935 a month next year

A fall in inflation could impact how much people who claim state pension will receive next year. Latest Office for National Statistics (ONS) figures show that UK inflation fell to the lowest level in nearly three years in April.

Also, Consumer Prices Index (CPI) inflation slowed to 2.3 per cent in April, down from 3.2 per cent in March This, according to the DailyRecord, is the lowest level since July 2021 when inflation was recorded at 2 per cent, which is the Bank of England’s target level.

It is now that state pensioners should start to keep watch on the CPI as it forms part of the Triple Lock measure. This is used to work out the annual uprating for the contributory benefit.

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Through the Triple Lock, State Pensions increase each year. They go up in line with whichever is the highest of these three - the average annual earnings growth from May to July, Consumer Price Index (CPI) inflation in the year to September or 2.5 per cent.

Last month, the New and Basic State Pensions increased by 8.5 per cent. It means those on the full New State Pension will receive £221.20, or £884.80 every four-week pay period during the 2024/25 financial year. 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, explains what the new 2.3 per cent inflation figure could mean for the future of the State Pension Triple Lock and how the current measures could push payments up by 5.7 per cent next April.

"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.

"With inflation having now fallen 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)."

A 5.7 per cent rise on the current State Pension would see people receive (Full New State Pension) £935.20 every 4-week pay period, or £12,157.60 for the 2025/26 financial year. For the Full Basic State Pension, it would be £713.60 every 4-week pay period, or £9,276.80 over the 2025/26 financial year

He added: "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. Barring a significant drop in earnings growth over the next few months, this figure will likely determine next year’s Triple Lock."

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