Older state pensioners are set to receive a lower triple lock boost to their income than the amount given to new, post-2016 state pensioners. New state pensioners are in line for a boost to their state pension worth approximately £488 a year, because the Triple Lock forecasts show that right now, the benefit is set to increase by 3.9% in April 2027.
Triple lock increase details
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 £514 a year thanks to the Triple Lock, according to the latest figures.
But older state pensioners - who hit state pension age before April 2016 - are set to put up with a lower £374 annual boost, according to the latest estimates from financial firm Hargreaves Lansdown.
How the triple lock works
The DWP has to increase the amount paid to those who receive the state pension each year due to the ‘Triple Lock’ system, which enshrines in law that everyone who is eligible for the handout from the Department of Work and Pensions must see an increase each year, either level with inflation, wage growth or by 2.5%, whichever is highest. New Prime Minister Andy Burnham has already committed to the triple lock for the upcoming Budget this October, which was a Labour manifesto promise.
Right now, wage growth is higher than inflation. Inflation sits at 2.9%, while wage growth sits at 3.9%, and while these aren't 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 in October.
Projected pension payments
As reported by 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 [ie the old 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."
Minimum rise and retirement advice
The absolute minimum rise possible is £313.69 for a new state pensioner, as this is the minimum floor 2.5% for an increase, and £240.37 a year for an older state pensioner, also based on the 2.5% minimum.
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)."
