With average wages finally catching up with the rate of inflation, your State Pension could increase by 8.5% next year. We explain why that might happen and what to expect.
First things first – what is the triple lock?
To understand why the State Pension might increase, it’s important to first understand how the government decides how much to increase it by – also known as: the triple lock. In a nutshell, the triple lock is there to make sure that the State Pension doesn’t lose value over time. It guarantees that, each year, the State Pension will rise by the highest of three measures:
- Average earnings,
- Inflation, as measured by the Consumer Prices Index (CPI),
- Or 2.5%.
So, for example, if average earnings rose by 2% and inflation rose by 3% in a year, then the State Pension would be increased by 3%.
If you want to read more about the triple lock, try What is the State Pension triple lock and how does it affect me?
Why could the State Pension rise?
Recent figures show that average earnings have increased by 8.5% this year, whereas inflation has come down to 6.7%. So, going by the triple lock, the State Pension would be due to increase by 8.5% at the start of the next tax year – 6 April 2024.
How much State Pension would I get?
If the State Pension were to increase by 8.5%, you’d be looking at an extra £900 a year for the full new State Pension. It would take the yearly amount to over £11,500 for the first time.
That’s a difference of £203.85 per week to £221.20 per week for the full new State Pension, while the full basic State Pension would rise from £156.20 per week to £169.50 per week.
Let’s recap: what’s happened with the triple lock and the State Pension recently?
Not too long ago, the government decided to suspend the triple lock for the 2022/23 tax year. This was because average wages were rising by over 8%, following the Coronavirus pandemic. So sticking with the triple lock would mean that the State Pension increase would need to match this – an unusually high increase at the time. By suspending it, the government was hoping to ensure fairness between pensioners and taxpayers.
However, in last year’s Autumn Statement, the government announced that it was bringing the triple lock back with a bang. At the time, inflation was the highest of the three measures at 10.1%, meaning the State Pension had its biggest ever increase in April 2023.
So, will the State Pension rise?
It’s likely many pensioners will be watching with bated breath wondering if the State Pension could see record increases for a second year in a row.
But keep in mind that third measure – 2.5% – is there for a reason. There were years where 2.5% was the highest of the three measures. In fact, the biggest increase the State Pension had in the last 10 years was 3.9% – so the jump to 10.1% was huge.
We can’t say for sure that the State Pension will rise again – after all, the government suspended the triple lock before when wage increases were at a similar percentage. So a second major increase to the State Pension could spark conversations about whether or not the triple lock should be suspended again. On the other hand, they’ve also increased it by more than 10% recently, so it’s not out of the question.
All could be revealed in the Autumn Statement on 22 November. Don’t worry – we’ll keep you up to date with any changes to pensions. In the meantime, keep your eyes peeled and your fingers crossed!
The information here is based on our understanding in October 2023 and shouldn’t be taken as financial advice.