State pensioners are on track for another large payment increase next year with payments increasing by over £900 a year for those on the full amount.
The average earnings figure that is used for the triple lock was published today with total pay including bonuses increasing 8.5 percent between May and July 2023.
If the state pension increased by 8.5 percent, the full new state pension would increase next April from £203.85 a week to £221.20 a week, an increase of £902.40 a year.
The full basic state pension would increase from £156.20 a week to £169.50 a week, an increase of £691.60 a year.
George Sweeney DipFA, deputy editor at personal finance comparison site finder.com, said: “The average earnings growth figures announced today indicate that we will see a significant rise to the state pension in April 2024, as wages continue to climb faster than inflation which currently sits at 6.8 percent.
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“The implications of this are serious, as the state pension could be set to increase to over £220 a week in 2024, an amount which would stretch government spending significantly and create a huge hole in an already patchy budget.”
The payment increase could move many pensioners into paying tax with the personal allowance frozen at £12,570 a year.
This means a person on the increased full new state pension, at 11,502.40 a year, would only have to have around £1,070 more in income each year and they would start paying tax.
Figures from LCP suggest around 650,000 pensioners would start to pay tax with the increased state pension.
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Steve Webb, partner at LCP, said: “This is likely to drag well over half a million more pensioners into the income tax net. Once again, ‘stealth’ taxation proves a convenient revenue raiser for the Chancellor.”
Looking to the future of the triple lock, he said it is uncertain if the political parties will set out plans to scrap the policy ahead of the General Election.
He said: “There is no doubt that the present government and opposition would both like to drop the policy in order to make savings to be spent elsewhere.
“But both wants to avoid a situation where they have moved first by dropping the triple lock only to find that the other party has retained it”.
Jon Greer, head of retirement policy at Quilter, said the metrics used for the triple lock can also be unfair on taxpayers who have to cover the cost for state pension payments.
He said: “Real wages aren’t really growing by 8.5 percent when you remove the huge toll inflation has had. In fact real wage growth is negligible.
“The Government has previously said there must be fairness between taxpayers and pensioners in setting the state pension increase.
“That is true but often the level of increase given under the triple lock is conflated with arguments on what the level of the state pension should be relative to mean full-time earnings.
“Arguably there should be agreement on the level of the state pension and separately a fair mechanism for ensuring its value is maintained overtime.
“Without such an approach each time the uprating of the state pension occurs a dividing line will be drawn setting generations against each other.”
Tom Selby, head of retirement policy at AJ Bell, said the triple lock lacks a clear goal and causes uncertainty for pension savers.
He said: “What savers of all ages need from the government is stability when it comes to state pension policy.
“Ideally, that would come through cross party agreement on how much income the state pension should provide in retirement and how much of someone’s later years should, on average, be spent in receipt of the state pension.
“Serious consideration should also be given to develop smoothed earnings and inflation measures which can then be used to deliver less volatile annual increases.”
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