State pensioners aged under 77 are in line for another £488.80 per year under Prime Minister Andy Burnham, as the next triple lock figures begin to take shape ahead of the Budget on October 28.
New state pensioners who reached state pension age during or after April 2016, so would now be no older than 77, are set for a larger triple lock increase than older pensioners. Their weekly payments are higher, although new state pensioners are not entitled to some defunct schemes such as Second State Pension.
Triple lock confirmed for this Parliament
Mr Burnham has already confirmed he will stand by the triple lock for the rest of this Parliament, despite plans to axe it from 2030. The triple lock uprates state pension payments annually by one of three metrics: inflation, wage growth, or a flat 2.5%, whichever is highest.
According to the latest analysis by financial platform Hargreaves Lansdown, new state pensioners are in line for a boost worth up to around £488 a year. That is because triple lock forecasts show the benefit is set to increase by 3.9% in April 2027.
Who qualifies for the new state pension
The new state pension was introduced in 2016 and applies to all men born after April 5, 1951 and women born after April 5, 1953. Everyone who gets the full new state pension could be handed another £488 a year thanks to the triple lock, according to the latest figures.
Right now, wage growth is higher than inflation. Inflation sits at 2.9%, while wage growth stands at 3.9%. While these are not the final figures, it looks likely that wage growth rather than inflation will be the metric used when the final triple lock is set at the next Budget on October 28.
What the increase would mean for payments
According to Helen Morrissey, head of retirement analysis at Hargreaves Lansdown: "According to the ONS, average wage growth stood at 3.9%. We may have just over a month to wait until the relevant inflation figure is published, but it currently stands at 2.9%, so unless there’s a real surge it seems likely that the average wage figure will be used."
Such an increase would put someone on the full new state pension on course to receive £250.70 a week from next April – up from the current £241.30 per week. Someone on a full basic state pension would receive £192.10 a week – up from £184.90.
"This will be a welcome boost to pensioner incomes but even a full state pension is only ever going to cover the basics. If you want to live well in retirement, then you will need to take your pension planning into your own hands," Ms Morrissey said.
If the figures were to remain the same, it would lead to a £488 per year boost for a new state pensioner with a full National Insurance record. If wage growth drops in the following three-month period, the calculation would reduce, but if it increases, the triple lock rises yet higher. The absolute minimum rise possible is £313.69, as this is the minimum floor 2.5% for an increase.
But for some, the boost may still not be enough to guarantee an 'adequate retirement'.
Ms Morrissey added: "If you have a gap between what you have and what you need, then taking small actions, like boosting contributions every time you get a pay increase or a promotion could have a big impact over time."
"Your employer might also be willing to increase their contribution if you increase yours – known as the employer match – and this can also make a big difference. This steady drip feed of contributions invested over the long term can transform your retirement."
"If you’re worried that you’ve neglected your pension, then it’s important to say that it’s never too late to make a difference to your retirement."
"Take stock of what you have, and if you have any extra money to contribute, it can still make a huge difference. You can usually access money in a pension from age 55 (rising to 57 in 2028)."
