The Treasury is expecting the state pension to rise by an inflation-beating £400 from April 2025, according to reports, somewhat softening the blow to those now ineligible for the Winter Fuel Payment.
Next week will see the all-important average earnings growth figures for July published (10 September) which will determine the level of the ‘triple lock’ state pension uplift in April 2025.
According to a BBC report, it has seen “internal working calculations” suggesting the Treasury expects the new full state pension to be boosted by £400 under the triple lock mechanism which the Labour Party has committed to.
This allows pensioners to receive an annual increase equal to the highest of price inflation, earnings growth, or a minimum rate of 2.5%.
The latest inflation figure for the year to July stands at 2.2%, while annual growth in total earnings, including bonuses, came in at 4.5% for the April to June 2024 period.
At the time, pension experts said this figure “gives the best indication yet of how much the state pension will increase next April under the triple lock”.
Working with the 4.5% figure, they suggested someone on the full new state pension of £221.20 per week, would see this figure rise by £9.95 to a total of £231.15 per week (£12,020 a year).
For those who reached the state pension age before 6 April 2016 and who are on the full basic state pension of £169.50, the increase could be around £7.65, bringing them to £177.15 per week (£9,212 per year).
Now, there are just a few days until we find out for certain what the wage growth figure will be.
But for now, pension experts say this pension boost provides a ‘silver lining’ against the recent Winter Fuel Payment changes.
Winter fuel, winter challenges and pension politics
Tom Selby, director of public policy at AJ Bell, said: “Rachel Reeves’ decision to brutally scale back the Winter Fuel Payment will see millions of pensioners taking a hit of up to £300 later this year. There could, however, be a silver lining coming in April 2025 in the form of a bumper state pension boost if strong recent earnings growth figures are repeated.”
Lily Megson, policy director at My Pension Expert, said: “The Government’s renewed commitment to the triple lock coupled with the Treasury’s expectation of an above-inflation increase will provide some relief to pensioners. While debates about its affordability will likely rage on, the triple lock has been essential in protecting retirees’ incomes, ensuring their state pensions keep pace with inflation or earnings – crucial given the soaring cost of living over the last few years.
“But while the increase is welcome, it’s important to remember that many pensioners will still face significant financial challenges. The recent decision to cut the Winter Fuel Payment for most households will be a major concern for many older people at a time when energy prices remain high. Simply put, the triple lock alone won’t address all the UK’s pension challenges.”
Meanwhile, Jon Greer, head of retirement policy at Quilter, said: “While the anticipated uplift in the state pension is positive news for pensioners, it is essential to consider the broader implications and sustainability of the triple lock policy.
“The Government’s pension review will latterly look at pensions adequacy which must consider both state and private provision. Perhaps the review will be the mechanism to start the journey for change that removes the politics from the triple lock.”
