State pensioners aged under 77 are in line for an additional £488.80 per year under Prime Minister Andy Burnham, as the next triple lock figures begin to take shape. New state pensioners who reached state pension age during or after April 2016, and are therefore now no older than 77, are set for a larger triple lock increase than older pensioners, as their weekly payments are higher, although they are not entitled to some defunct schemes such as the Second State Pension.
Triple lock commitment confirmed
Mr Burnham has confirmed he will stand by the triple lock, the mechanism that 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 approximately £488 a year, as triple lock forecasts show the benefit is set to increase by 3.9% in April 2027.
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.
Wage growth drives increase
The Department for Work and Pensions (DWP) must increase the amount paid to state pension recipients each year due to the triple lock system, which 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. Mr Burnham has already committed to the triple lock for the upcoming Budget in October, which was a Labour manifesto promise.
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.
Projected weekly payments
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.
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.
Expert advice on pension planning
Helen Morrissey, Head of Retirement Analysis at Hargreaves Lansdown, said: "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."
She added: "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 also noted: "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."
She concluded: "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)."
