Millions of pensioners could be in for a £869 bumper boost to the state pension as wages soarPensioners are set for an increase to around £11,500 per year if trend continuesAnother large hike would follow the 10.1% bumper increase last year By Ryan Prosser
Published: 19:33, 15 August 2023 | Updated: 21:26, 15 August 2023
Millions of pensioners could be set for a state pension boost next year to the tune of £869.
Experts predict rising wages will be the key factor determining by how much the state pension will increase in April 2024.
The state pension increases in line with average wages, inflation or 2.5 per cent – whichever figure is the highest, under the ‘triple lock’ formula.
With ONS statistics showing an 8.2 per cent rise in pay including bonuses for the months between April and June this year, experts believe that high wage growth will continue and an £869 annual rise in on the cards if this trend continues.
This means pensioners on the flat rate state pension would get £220.55 instead of £203.85 a week.
Under the triple lock, the state pension increases in line with whatever is the highest figure out of September wages, inflation or 2.5%
The increase would take the flat rate state pension to a forecast £11,500 a year from the current figure of £10,600, which would be welcomed by those hit by soaring household bills.
Those who retired after 2016 with enough qualifying years get the flat rate state pension, while those who retired before then get the basic state pension, which is topped up by additional entitlements depending on work history.
How much is the state pension? The full flat rate state pension is £203.85 a week or an annual £10,600
An 8.2 per cent rise would boost it to around £220.60, or £11,500.
People who retired before April 2016 on a full basic state pension now receive £156.20 a week or £8,120 a year. This would go up to around £170 a week, or £8,800.
The old basic rate is topped up by additional state pension entitlements – S2P and Serps – if they were earned during working years.
People who have contracted out of S2P and Serps to pay less National Insurance over the years and retire after April 2016 might get less than the full new state pension.
Inflation is forecast to fall from 7.9 per cent to 7 per cent, when the ONS reveals figures for July tomorrow.
However, the triple lock uses the September inflation figure, which is due to be released in October.
Analysts expect the decline in inflation to continue, meaning the higher wages figure would decide the triple lock and deliver an inflation-busting rise.
The state pension boost would, however, fall short of the bumper rise of 10.1 per cent seen last year. Although that merely matched the high inflation figure at the time.
But the forecast 8.2 per cent hike would be 2 per cent higher than the 6.2- per cent increase predicted by the Office for Budget Responsibility at the time of the March 2023 budget.
It could mean an added £2 billion slapped onto the Department for Work and Pensions bill, said former pensions minister Steve Webb.
Jon Greer, head of retirement policy at Quilter, said it was unlikely that the government would backtrack on its pledge to keep the triple lock, despite its huge cost.
In addition to the state pension increase next year, millions can also expect a £150-£300 top up to their winter fuel payment.
People are paid the state pension according to the number of years they made National Insurance contributions.
Those with at least 35 years of qualifying payments, may be entitled to the maximum amount.
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