An 8.5% notable rise in the state pension is anticipated this coming April due to the mechanism called the triple lock, prompting further discussion on the equity of this policy among political circles. State pensions are typically adjusted to match the growth of prices or earnings.
The state pension, distributed every four weeks by the government, extends to those of approved age who have made sufficient National Insurance contributions. In April 2023, it had experienced a 10.1% increase according to the September inflation measurement. The value of the state pension currently stands at £203.85 per week for the full, new flat-rate state pension, and at £156.20 per week for the full, old basic state pension.
Given the likely 8.5% hike in April 2024 under the triple lock’s link to earnings, the state pension’s projected amounts will be £221.20 and £169.50 per week correspondingly for the new flat-rate and old basic pensions.
As to the ‘triple lock’ system, it guarantees the annual increase of the state pension each April according to the highest of three determinants: the inflation as measured by the previous year’s September Consumer Prices Index, the average increase in UK wages, or 2.5%. Introduced in 2010 by the coalition government of the Conservative-Liberal Democrats, the triple lock was aimed at preventing the real value of the state pension from being outpaced by the rise in the cost of living or wages.
More than 12 million people are currently state pension recipients, starting from the age of 66 for those born between October 6, 1954, and April 5, 1960. For those born after these dates, the qualifying age for the state pension is set to increase progressively to 67, and then to 68 between 2044 and 2046.
The state pension, costing £105 billion, represents nearly half of the government’s total expenditure on benefits. Apart from the state pension, those over the retirement age can also qualify for Pension Credit if they do not have any other income source. Additional financial aid may include cost-of-living payments, housing benefits, council tax reduction, and heating cost assistance through the Warm Home Discount Scheme. The annual winter fuel payment is another entitlement for those born before 26th September 1956.
In the last budget announcement, significant changes were made to private pension allowances in order to incentivize older citizens to remain in employment or rejoin the workforce after retirement. The shift includes an increase in the previous £1,073,100 lifetime pension allowance threshold, which was due to be intact until 2026. The annual pension allowance was also increased from £40,000 to £60,000.
However, the Institute for Fiscal Studies (IFS) labelled the estimated employment increase by 15,000 workers due to these measures as over-ambitious, suggesting that these changes would not significantly bolster the employment rate.
