The autumn statement confirmed the State Pension will rise by 8.5% in April 2024 in line with the triple lock.
For someone receiving the full new State Pension (a man or woman born on or after 6 April 1951 and 1953 respectively), their weekly pension income will grow from £203.85 to £221.20. For anyone receiving the full basic State Pension (a man or woman born before 6 April 1951 and 1953 respectively), their weekly income will rise from £156.20 to £169.50.
This news will be welcomed by those who’ve struggled to make ends meet during the cost-of-living crisis. With inflation showing signs of falling back, such an increase has the potential to bring some much-needed breathing space to people’s budgets.
The triple lock pledges to raise the State Pension each April by the highest of:
2.5%
CPI inflation
Average earnings growth
The decision does however bring an extra headache for the government. This is the second large increase in a row and this, along with the fact we’re living longer means the cost of the State Pension continues to spiral.
There are options open to the government to try and contain this cost.
One is to increase State Pension age and the government recently conducted a review of State Pension age that included whether to bring forward the rise to age 68.
However, slowing longevity increases and concerns about people’s ability to keep working into their late 60s were among reasons that prompted them to shelve the idea. But, it’s likely to make a reappearance in future.
Another option would have been to break the triple lock and opt for a lower increase.
Breaking with the triple lock isn’t a decision to be taken lightly, but it is something that’s been done before.
When average wage data was inflated by the unwinding effects of the COVID-19 furlough scheme, the government opted to disregard earnings growth and opt for the lower inflation figure instead.
There was a similar situation this year. Earnings growth was inflated by the effect of one-off bonuses to NHS workers and civil servants. This prompted speculation that we could see the government opting for a lower figure again.
The rumours ended up being unfounded. However, speculation will continue to rage about whether the triple lock remains sustainable over the long term.
How has the State Pension changed?
* After April 2011, the Consumer Price Index (CPI) has been used for inflation instead of the Retail Price Index (RPI).
** The triple lock was suspended in April 2022 because of the dramatic growth in earnings in Summer 2021 caused by the unwinding of the effects of the furlough scheme (Coronavirus Job Retention Scheme).
How to get the most from your State Pension
We often talk about people getting the full State Pension, but lots of people don’t qualify for the full amount. There are things you can do to boost your entitlement though.
People retiring under the new State Pension system need to have at least 10 qualifying years on their National Insurance (NI) record to get any new State Pension and to receive the full amount, you need to have 35 qualifying years.
It’s a good idea to get a State Pension Forecast to make sure you’re on track. This will also highlight any gaps in your record that might need to be filled.
If you have gaps where you weren’t paying NI, you may be able to get NI credits, which help increase the number of qualifying years you have.
You might also be able to plug the gaps with voluntary NI contributions. However, it’s really important that you check with the Department for Work and Pensions (DWP) before handing over any money to make sure you really will benefit.
Lots of people are affected by a process called contracting out, which was previously a feature of the State Pension system. It’s since been abolished, but many will still get a lower State Pension as a result. If you were contracted out of the Additional State Pension, you would have paid NI contributions at a lower rate or some of the NI contributions you paid would have been used to contribute to a workplace or private pension, rather than the Additional State Pension.
It might be the case that even paying for extra NI contributions won’t boost your State Pension amount, so it’s important to check.
This article isn’t personal advice. If you’re not sure what’s right for your circumstances, ask for financial advice. Pension and tax rules can change, and benefits depend on your circumstances.