Everyone who gets the state pension is set for a boost of over £680 in the months following the General Election.
Both Labour and the Conservatives made pledges in their manifestos aimed at state pensioners in the run up to the election.
Now that we have a Labour government, we know what the outlook is for the following year in terms of state pension changes, income and taxation.
Labour promised to retain the Triple Lock system in its current form. It means that, assuming the promise is kept, the government will hand out around £689 to state pensioners in the next financial year, unless the economic situation changes massively between now and August, when the final calculation is made.
The Triple Lock works by handing state pensioners, either on the basic state pension or the new state pension, a guaranteed increase every year. The state pension must increase either by wage growth, Consumer Price Index (CPI) inflation or 2.5 percent, whichever of the three metrics is highest.
Right now a wage growth figure of nearly six percent is set to hand another 5.9 percent boost to pensioners on both the basic and new forms of the state pension from the next financial year, April 2025.
The Consumer Price Index (CPI) dropped to two percent in May, which is a reduction from April’s 2.3 percent and the lowest level inflation has been seen at since July 2021.
It could mean significant implications for millions of pensioners because the CPI is a crucial aspect of the Triple Lock, which determines the annual increase for state pensions.
Both the basic state pension and the new state pension will rise by at least 2.5 percent, or whichever is the highest out of annual wage growth from May to July or the CPI inflation rate year on year to September.
Right now, earnings growth looks set to be highest, at 5.9 percent, but it’s not until August’s announcement that the final Triple Lock figure will be decided.
Currently, figures of 5.9 percent growth would see the state pension jump from £221.20 a week to £234.45 or £937.80 per month.
Across a full year, the state pension would be £12,191.40 per year, up from £11,502.40. It would also mean the amount stays under the personal allowance tax threshold (just) of £12,570 assuming you have no other income – an increase of £689 per year.
Labour has not matched the Conservatives’ Triple Lock Plus pledge, which was a promise to move the income tax thresholds for Personal Allowance just for pensioners only. But this year, the state pension would not reach the threshold anyway, and it has not yet been announced if the Personal Allowance thresholds – which have been frozen for several years now – will be increased for everyone next year or frozen again.