‘Triple Lock’ to raise state pension by £869

Millions of pensioners will be set for a 8.5% boost to pensions next year as Prime Minister Rishi Sunak signalled he was committed to maintaining the ‘triple lock’ amongst record high earnings growth.

The Office for National Statistics (ONS) recently released figures showing that average earnings growth between May and July was 8.5%, the highest regular annual growth rate since comparable records began in 2001.

With the 8.5% figure state pensions are on track to increase from April next year by up to £901 next year – a welcome windfall during the cost of living crisis. 

The Prime Minister assured the public that he’d hold up his end of the bargain, saying the Government was “committed to its policy on the triple lock.” This comes ahead of the 2024 general election.

Although Rishi Sunak has said he is committed to upholding the triple lock, it’s important to consider that the Institute for Fiscal Studies has warned that if the triple lock is kept in place, it could add to the welfare bill in the range of £5 billon to £45 billion by 2050, a heavy cost for the Government to consider. 

The ‘Triple Lock’ explained

The ‘triple lock’ refers to a well-known state pensions policy that ensures state pensions rise every year by either the average earnings growth, inflation (as measured by the Consumer Prices Index) or a flat 2.5% - whichever is highest that year, hence the name ‘triple’ lock. 

It was designed in principle to make sure that state pension value would always have the best growth outcome each year for tax payers. The guarantee that the highest of the three will be what the state pension increases  against to ensure that retirees of state pension age have three layers of protection against inflation, hence the name ‘triple lock’. This is incredibly important in maintaining a level of healthy financial security for those relying on their state pension, as it guarantees some form of growth irrespective of how volatile the economy becomes.

What this means for my pension in real terms

The state pension will increase by 8.5% in 2024-25 in line with the triple lock.

This would mean that for men born after April 1951 and for women born after April 1953, their pensions will rise by £901, an increase from the current £10,600 to £11,501 a year.

 Those born before this will be on the basic state pension therefore an 8.5% increase would result in the state pension increasing to £690, rising from £8122 to £8,812 a year.

If you’re thinking about your retirement plans and  want to find out more about how you can navigate the ever change pensions landscape, why not give us a call on 0333 323 9065 to find out how we might be able to help. We’re offering all those with £100,000 or more in pensions, savings or investments a free initial consultation. 

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.