State pension set to rise by £460

The latest wages data suggests that the new full state pension is expected to rise by £460 a year from April.

The rise is expected to be driven by the “triple lock” mechanism, which dictates that the state pension rises annually based on the highest of three factors: inflation, average wage growth, or 2.5%.

This comes as recent controversy over fuel payment cuts and follows a £900 increase in state pensions last year, bringing the full state pension for men born after 1951 and women born after 1953 to approximately £12,000 annually in 2024.

The BBC reported that the latest ONS figures imply:

• the full, new flat-rate state pension (for those who reached state pension age after April 2016) is expected to increase to £230.05 a week. That will take it to £11,962.60 a year, a rise of £460 compared with now.
• the full, old basic state pension (for those who reached state pension age before April 2016) is expected to go up to £176.30 a week. That will take it to £9,167.60 a year, a rise of £353.60 compared with now.

Helen Morrissey, head of retirement analysis, Hargreaves Lansdown, said:

“Strong wage growth looks set to deliver a boost to pensioner’s pockets of around £460, with the latest wage data showing average wages including bonuses rose by 4%. However, there’s every chance it’s not enough to placate those pensioners still reeling from the loss of the winter fuel payments, especially given how close this is edging to busting the personal allowance.
The loss of the winter fuel payment will be especially keenly felt by older pensioners on the basic state pension who receive larger payments, but have seen a smaller increase in their state pension as they are not on the new flat rate pension. Life is also tougher for those who get pension credit and the winter fuel payment, who won’t be getting a cost-of-living payment this November.

At the same time, the increase will take the full state pension to just shy of £12,000 next year, closing in on the £12,570 personal allowance. Given that the freeze to this threshold is expected to remain in place until 2028, it raises the spectre of the full state pension alone taking pensioners over it and into the realms of paying income tax during the next few years. For those who have saved for the future, paying tax on income in retirement is nothing new, but the principle of paying tax on the state pension is still very unwelcome.

If pensions are rising with price inflation at the point when the state pension eventually breaches the personal allowance, once tax is taken into account, retirees who get just the state pension will actually be worse off in real terms. Pensioners are already asking whether they should be in the frame for filling the gap in the public finances, and this isn’t going to quell their concerns.
It’s just one reason why we need to see the state pension and the triple lock’s role form part of the government’s pension review, so pension provision can be assessed in a holistic manner that puts the state pension on a sustainable footing long term. People need certainty of what they will receive from the state – and when – in order to make sensible plans for their retirement.”