Older state pensioners are set to receive a boost to their state pension worth approximately £374 a year, thanks to forecasts for the Triple Lock, which remains confirmed for 2027. The benefit is currently projected to increase by 3.9% in April 2027.
The old state pension was closed off as of April 2016. State pensioners who began claiming DWP payments before that date were only entitled to the old state pension, while younger pensioners claiming after that date received the 'new state pension', which offers higher weekly payments but no longer includes elements such as Additional Pension (AP) payments.
Triple Lock remains in place for 2027
The DWP must increase state pension payments each year under the 'Triple Lock' system, which legally requires that everyone eligible for the handout sees an annual rise, either level with inflation, wage growth, or by 2.5%, whichever is highest.
The Triple Lock, the metric increasing the payments, has been scrapped by Andy Burnham pending Parliamentary process, but the change will not take effect until 2030. This means state pensioners will still receive increases based on the Triple Lock in 2027 as planned.
Wage growth likely to drive increase
Currently, wage growth is higher than inflation. Inflation stands at 2.9%, while wage growth is at 3.9%. Although these are not the final figures, it appears likely that wage growth will be the metric used when the final Triple Lock is set at the next Budget later this month.
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 (the old state pension) would receive £192.10 a week – up from £184.90.
Impact on pensioner incomes
If the figures 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 for older state pensioners is £240.37 extra per year, as this is how much the current £9,614.80 annual payments must rise if the lowest possible increase, a flat 2.5%, is the metric used to increase state pensions this year.
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)."
