State pension on track to increase 10% if Truss keeps triple-lock promise

The state pension is on track to exceed £10,000 a year if the Government makes good on its promise to reinstate the “triple lock” on annual increases.

The popular guarantee means that the state pension increases at the highest inflation, wage growth or 2.5 percent, but it was dropped last year because the pandemic temporarily skewed the earnings figure.

The rate of inflation will be higher this year, so the increase in state pensions must be decided by the CPI figure for September, which will be released on October 19.

People's Guarantee: State pension on track to rise 10% if new PM Liz Truss upholds triple lock promise

People’s Guarantee: State pension on track to rise 10% if new PM Liz Truss upholds triple lock promise

Inflation in August, published last week, was at 9.9 percent, down from 10.1 percent. The latest earnings growth figure, based on full pay including bonuses, was 5.5 percent.

But seniors anxiously waiting to find out what state pension increase they’ll get next April might find it’s still underpriced.

Inflation could remain around 10 percent during the key month of September, but rise further this winter despite the government’s freeze on the maximum price of energy.

Last year, the triple lockdown was suspended because wage increases were distorted as the labor market recovered from the impact of Covid-19.

I paid NI for 44 years, but I receive a smaller state pension than people retiring now. How fair is that?

This is Money pension columnist Steve Webb explains how the renewal in April 2016 was designed to be fair to everyone, and why people who reached state retirement age before then don’t need to feel bad.

‘The transition to the new state pension does not represent a stroke of luck for people who have not yet retired,’ he says.

But this year, soaring inflation is taking a heavy toll on retirees struggling to pay household bills.

If August’s 9.9 per cent inflation rate were used, retirees on the post-2016 full-rate state pension of £185.15 a week or around £9,600 a year would see a rise to £203.50 per week or £10,600 per year.

Those on the old basic rate would see a jump from £141.85 a week or around £7,400 a year to £155.90 or £8,100 a year.

During the Tory leadership campaign, Prime Minister Liz Truss promised to reinstate the triple lockdown this year, but is likely to be pressured to change course due to tightening public finances.

There is overwhelming support for the triple lock among retirees, though less so among the younger generation.

Some 55 per cent of adults in general support maintaining triple lockdown in the current circumstances, according to a Canada Life poll weighted to be representative of all UK adults.

But that drops to 78 percent among those 55 and older, 44 percent among 35-54 year-olds and 33 percent among 18-34 year-olds.

>>>What do you think? Vote in our triple lockout poll below

Separate research by Canada Life found that two-fifths of UK adults have cut spending as a result of rising prices.

About 37 percent are worried about their own or their household’s finances, and 31 percent are already feeling the impact of inflation on their finances.

How was the state pension under triple lockdown decided over the years?

* Subject to seasonal adjustments

* Subject to seasonal adjustments

* Subject to seasonal adjustments

State pension on track to rise by a record amount next year

“The immediate outlook looks bleak, with the Bank of England forecasting peak inflation to come later this year at around 13 percent,” says Andrew Tully, chief technical officer at Canada Life.

‘The peak, when it comes, will offer a little respite when the tail of inflation is forecast to last well into next year and not come close to the target of around 2 per cent for several years.

‘While UK workers continue to feel the pain of wages lagging behind inflation, there will be some positive news in the coming months for retirees.

“As inflation progresses, the September data will determine the standard of living for millions of pensioners across the UK for the next year, with the state pension very likely to rise by a record amount in April 2023.

What are This is Money readers saying about the triple lock?

Our recent poll showed strong support for seniors getting the full state pension increase as promised under the triple lockdown next April.

Give us your opinion below.

Poll

Should the government stick to its triple lockdown commitment and give seniors the full state pension increase this year?

  • Yes 7145 votes
  • Nope 250 votes

“People are clearly cutting back where they can and many are worried about their household finances.

“Unfortunately, the worst is yet to come unless we see more significant government intervention in the coming weeks.”

April raise seems a long way off for struggling retirees

“Inflation has eased this month but remains very high and looks set to remain so for the foreseeable future,” says Helen Morrissey, senior pension and retirement analyst at Hargreaves Lansdown.

‘This means that retirees are in line for a significant increase in pensions next year, as long as the Government maintains its commitment to maintain the triple block.

‘If the link to the CPI is maintained, then we could see retirees on a new full state pension get more than £200 a week.

‘Last year’s 3.1 per cent increase did not keep up with skyrocketing inflation and has left many retirees struggling, so a more generous increase will be welcome.

“However, any such increase won’t take effect until April, which seems a long way off at the moment for those struggling to make ends meet.”

Questions remain about the affordability of the triple lock.

“The Government has previously committed to reinstating the triple lock after suspending the earnings element for 2022-23 due to distortions caused by the Covid-19 pandemic,” says Kate Smith, director of pensions at Aegon.

He notes that the new prime minister, Liz Truss, reiterated this during her leadership campaign, but adds: “Doubts will remain about its affordability and whether the triple lockdown will survive in its current form in manifestos from all parties ahead of the next general election.” “.

How much is the state pension?

The basic state pension is currently £141.85 a week, or around £7,400 a year. It is supplemented by additional state pension rights (S2P and Serps) if they are accumulated during the working years.

The two-tier state system was replaced in 2016 by a new “flat rate” state pension. This is currently worth £185.15 per week or around £9,600 per year.

People who have hired S2Ps and Serps over the years and retire after April 2016 get less than the new full state pension.

But they can fill in gaps in unpaid or underpaid National Insurance in previous years, do voluntary top-ups to buy additional qualifying years, and rack up more years if they have enough time between now and state retirement age.

Workers had to have 30 years of Social Security contributions to get the old state pension, but now they must have 35 years of contributions to get the new flat-rate state pension.

But even if you paid in full for 35 years, if you hired for a few years on top of that, you could still reduce what you get.

Everyone has the option to defer their state pension to get more in their later years. You can check your NI record here.

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