BBC Money Box experts explain increases to State Pension
Older Britons could “be winners” if predicted changes to wage rises take place which could see state pension payments rise more than expected next year.
According to The Times, economists are forecasting that earnings growth may soon overtake the Consumer Price Index (CPI) rate of inflation.
This would have massive implications for the triple lock which uses either inflation, average earnings, or 2.5 percent as the rate increase to state pensions; whichever is highest.
As it stands, the latest CPI inflation rate for June came to 7.9 percent while wage growth from March to May came to 7.3 percent.
The earnings figures used for the annual state pension rise are the statistics for May to July, which are published in mid-September, while the CPI rate for September is used for inflation.
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For 2023, pensioners were awarded a 10.1 percent increase in their retirement payments thanks to the triple lock.
In recent months, inflation in the UK has slowly eased with the expectation that retirees will receive a much less generous hike in 2024 than this year.
If average earnings exceed the inflation rate for September, pensioners may receive a larger boost to payments than initially thought.
Steven Cameron, the Pensions director at Aegon, outlined the implications for older Britons if this were to happen.
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He explained: “The triple lock has come under intense scrutiny in recent years because of the volatility in earnings growth during the pandemic, and more recently because of sky-rocketing inflation, which reached double figures late in 2022 and has remained stubbornly high.
“In April 2022, the Government suspended the earnings component because of furlough distortions, meaning state pensioners received an increase based on the previous September’s inflation of 3.1 percent which was around half the level inflation had risen to by April 2022.
“In April 2023, particularly high inflation meant state pensioners received a double-digit increase of 10.1 percent.
“If earnings growth does exceed price inflation in the coming months, state pensioners may be winners, particularly as they are less likely to be affected by rocketing mortgage costs and could also be benefitting from higher interest rates on cash savings.”
This year, recipients of the new state pension got £203.85 a week if they were entitled to the full amount.
Under the new state pension, claimants need to have 35 years of National Insurance contributions under their belt and must either be a man born on or after April 6, 1951, or a woman born on or after April 6, 1953.
Those on the basic state pension claimed a full amount of £156.20 a week under the 10.1 percent triple lock hike.
This pension is reserved for men born before April 6, 1951, and women born before April 6, 1953. Only 30 years of National Insurance contributions are needed to be eligible for the basic state pension.
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