New state pensioners are in line for a boost to their state pension worth approximately £488 a year, as the Triple Lock forecast points to a 3.9% increase in April 2027. The rise would take someone on the full new state pension to £250.70 a week, up from the current £241.30.
Triple Lock increase driven by wage growth
The Department for Work and Pensions (DWP) must increase the amount paid to state pension recipients each year under the Triple Lock system. This enshrines in law that everyone eligible must see an increase each year, either level with inflation, wage growth, or by 2.5%, whichever is highest.
Currently, 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 in October.
New Prime Minister Andy Burnham has already committed to the Triple Lock for the upcoming Budget this October, which was a Labour manifesto promise.
What the increase means for pensioners
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."
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 of 2.5% for an increase.
Retirement planning advice
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)."
