Home Finance Millions of Brits could see their State Pension payments rise by 5.7%...

Millions of Brits could see their State Pension payments rise by 5.7% next April


The Office for National Statistics (ONS) has released new data showing that UK inflation fell to its lowest level in almost three years this April. The Consumer Price Index (CPI) inflation rate dropped to 2.3 percent, down from 3.2 percent in March.

This is the lowest it’s been since July 2021 when it was recorded at two percent, which is the Bank of England’s target level.

State Pensioners across Great Britain, numbering nearly 12.7 million including over a million residing in Scotland, should start monitoring the CPI as it forms part of the Triple Lock measure. 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 percent. Current figures show earnings growth at 5.7 percent for January to March, 2024.

In April, the New and Basic State Pensions increased by 8.5 percent. 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, explains what the 2.3 percent inflation figure could mean for the State Pension Triple Lock and how the current measures could push payments up by 5.7 percent next April.

“For the April 2024 increase, earnings growth in 2023 produced an inflation-busting 8.5 percent 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 percent 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 percent (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.”

As Steven highlighted, the Triple Lock looks on track to be determined by the earnings growth element which is currently at 5.7 per cent. However, this figure may go up or down and isn’t the final metric that will determine the level of uprating.

The next CPI figure will be published by the ONS on June 18. Steven elaborated: “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.”

“This will make it less costly for the next Government to commit to maintain it for a further 5 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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