State Pension set to rise by more than £650 next April in triple lock pledge

The New State Pension will increase by more than £650 from next April, pushing it to just over £12,150 a year, finance experts have predicted. This is based on the triple lock guarantee, which ensures the State Pension rises in accordance with the highest of three measures - September inflation, May-July wage growth or 2.5 per cent.

The State Pension went up by 10.1 per cent in April 2023, based on rampant inflation, followed by another substantial rise of 8.5 per cent in April this year in line with the surge in pay growth. From April next year, the increase is expected to be significantly lower, with experts saying the data points towards a rise of around 5.7 per cent.

Recent news from the Office for National Statistics (ONS) that the Consumer Price Index measure of inflation is currently just 2.3 per cent suggests this will not be used to set the benchmark for raising pensions next year. The second element of the triple lock - an uprating of 2.5 percent - is also unlikely to be the leading factor in deciding any increase.

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For the coming year, industry experts suggest that average wage growth, currently at 5.7 per cent, will be the predominant option in the triple lock. Based on that, the payments from the New State Pension would increase from £884.80 to £935.20 for every four-week period. With 13 such periods in a year, this means the annual figure will rise by £655, taking it from £11,502 to £12,157, reports the Express.

The Basic State Pension, paid to those who reached retirement age before April 2016, would see an increase from £678 to £713.60. This implies that the annual figure will rise by £432, elevating it from £8,814 to £9,276.80 for the fiscal year 2025-2026.

Steven Cameron, Pensions Director at Aegon, said: "In April 2023, a spike in inflation the previous year led to a record-breaking 10.1 per cent boost to the State Pension. For the April 2024 increase, earnings growth in 2023 resulted in an inflation-busting 8.5 per cent increase.

"These increases and the underlying high volatility present in both price inflation and earnings growth have since raised serious questions over the longer-term affordability of the State Pension, which is funded by today's workers through National Insurance contributions."

He added: "With inflation now having 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). 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."

Mr Cameron suggested that the substantial pension increases seen in the past two years are unlikely to continue.

"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 stated.

"This will make it less costly for the next Government to commit to maintain it for a further five years. We may see lower rates of increases, but in times of lower inflation, the State Pension doesn't need to increase by as much to allow pensioners to maintain living standards.

"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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