The Chancellor has confirmed that the State Pension will be fully uprated in line with the triple lock which will see a 8.5 per cent uplift to payments in April next year.
The announcement came in today’s Autumn Statement. There had been earlier speculation that the government might use a figure of wage inflation excluding bonuses which would mean a lower increase.
Aegon’s pension director Steven Cameron says: “State pensioners will be relieved that the Government has honoured the state pension triple lock in full. This could deliver an increase of over double the ruling inflation rate next April.”
But he says: “This needs to be paid for out of the National Insurance contributions of today’s workers which raises concerns over intergenerational fairness and there is still a huge question mark over whether the triple lock is affordable longer term.”
Quilter’s head of retirement policy Jon Greer says this second year of bumper pay rises for pensioners raises the issue of state pension reform. He adds: “Tinkering with the triple lock measure will be something the government would have been loathed to do given it will upset the Conservative party’s core voters.
“Once again the triple lock and all its problems gets punted down the road for the next government to think about. There is a growing problem with the state pension and it’s unfortunate but not unsurprising that this government have not opted to make long term but potentially unpopular decisions about reforming how our state pension is uprated.
“The potential reform of how the state pension is calculated requires a delicate balance between protecting the income of retirees and ensuring the long-term sustainability of the pension system. The triple lock, which ensures that pensions rise by the highest of average earnings, inflation, or a minimum of 2.5 per cent, has been crucial in safeguarding pensioners’ income. However, this system can be financially unpredictable and may not be sustainable in the long run.”
This increase will mean that the full state pension will increase to £221.20 per week, or £11,502.40 per year from April. This follows the inflation matching 10.1 per cent boost that saw the 2023/24 state pension rise to £203.85 a week, or £10,600 annually.
Greer adds: “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. Transitioning to such a system, however, would require careful consideration and planning to protect current retirees while laying a sustainable foundation for future generations so it is unsurprising but disappointing that Hunt has not tackled this issue.”
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