Wage growth is still outstripping inflation, so it’s likely it’ll be key to the next State Pension increase under the triple lock.
The latest average wage increase including bonuses from April to June 2024 was 4.5%. Way down on last month’s 5.7%, but it has been affected by the one-off bonuses in the NHS in June 2023.
This article isn’t personal advice. If you’re not sure what’s right for you, ask for financial advice. Remember, pension and tax rules can change, and any benefits depend on individual circumstances. You also can’t access money in a pension until age 55 (rising to 57 in 2028).
What could happen to the State Pension?
The important figure for the triple lock is the one covering May to July 2024, being published next month.
Unfortunately for pensioners the effect of these one-off bonuses will linger, dampening the wage growth figure. So, they’ll get a smaller increase to their State Pension than they otherwise would have done.
If the figures stay the same next month, we could see the full new State Pension get around a £517 boost – taking it to approx. £12,019 per year. Those retiring under the old basic rate State Pension will see the full amount increased by approximately £396 to £9,210 from next April.
A rise like this will be welcomed by pensioners still struggling from the cost-of-living crisis. But with so many still reeling from the recent news that their Winter Fuel payment might be taken away, it won’t be quite the boost many hoped for.
What else is pressuring pensioners?
There’s another looming challenge for pensioners.
Frozen tax thresholds mean the State Pension is creeping closer to tax paying territory and a similar rise next year could even pass it. It could also be an issue for those also getting the Additional State Pension leaving them close to the threshold.
With these freezes in place until 2028, there’s every chance, we could see pensioners relying only on the State Pension paying part of it in tax.
Will you need more than the State Pension?
The State Pension is the backbone of people’s retirement income. But for a decent retirement income it’s important you supplement it with your own retirement savings, whether that’s through a workplace pension or Self invested Personal Pension (SIPP).
The latest data from HL’s Savings and Resilience Barometer shows only 38% of households are on track for a moderate retirement income. So, clearly there’s still more to do.
Small actions like upping your contributions when you get a pay rise or new job is one way of boosting your contributions. You should also make sure you’re making the most of any contributions your employer is making.
Retirement saving is especially important if you need to retire before State Pension age.
With healthy life expectancy less than age 63 and State Pension age going up to 67, someone could find themselves forced to exit the workforce years before the State Pension kicks in.
Having a decent amount saved in a pension or SIPP could help you navigate tricky times with more confidence.