Older people are set to receive a £460-a-year hike in the state pension to around £11,960 next spring, in line with wage growth of 4 per cent for the working population.
That means the full flat rate state pension will hit £230.05 a week, up from the current £221.20.
The state pension is increased every year by the highest of inflation, average wage growth or 2.5 per cent under the triple lock pledge to pensioners.
The Labour Government promised during the recent election to maintain the triple lock for the whole of the current parliament.
Triple lock: State pension is increased every year by the highest of inflation, average wage growth or 2.5%
The key wage growth figure used in the calculation is for total pay including bonuses in the three months to July, and was published today at 4 per cent.
The crunch CPI inflation rate figure is taken from September, and is published in October.
But it will almost certainly not come into play when setting the state pension this time – it currently stands at just 2.2 per cent.
The headline state pension got an 8.5 per cent boost to £221.20 a week or around £11,500 a year last spring, for people retiring since April 2016 who qualify for the full rate.
People who retired before April 2016 on the old basic rate state pension currently get £169.50 a week or around £8,800 a year.
A 4 per cent increase for them will work out at around £176.30 per week or nearly £9,200 a year next spring.
Those on this lower rate also get hefty top-ups, called S2P or Serps, providing those were earned earlier in life. However, these are raised in line with inflation, not the triple lock.
Annual full rate state pension since 2021. Source: AJ Bell
The Government has pointed to triple locked increases in the state pension to help justify its plan to scrap the Winter Fuel Payment for most pensioners.
Some 10million pensioners are expected lose the benefit, worth between £100 and £300 a year, before the next rise in the state pension in the spring.
Payments currently available to all pensioners will be restricted to those who claim pension credit or certain other benefits.
> How to apply for pension credit: Read a This is Money guide
The move has caused uproar among critics, who fear those not claiming pension credit or whose income is just above the cut-off point to qualify will face severe hardship and risks to their health or even life this winter.
Meanwhile, the Government will face a different challenge as the headline state pension rate gets closer to the £12,570 personal allowance.
This is the level at which income tax kicks in, and it has been frozen since 2021.
It creates an anomalous situation where the Department for Work and Pensions pays millions of people a state pension, some of which is then clawed back by the Treasury in income tax – potentially forcing an increasing number to file annual tax returns to HMRC.
Millions of pensioners already do this because they receive a state pension higher than £12,570.
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This is because they reached state pension age under the old pre-2016 system, and earned enough second state pension, also known as Serps, to build up more generous payments in retirement.
Meanwhile, a rising number of pensioners who receive even a modest income from private pensions on top of the state pension also have to complete a tax return.
‘Sticking with its triple lock promise may help redeem the Government in the eyes of UK pensioners.’ says Rachel Vahey, head of public policy at AJ Bell.
‘The Government is coming under more intensive pressure to ‘u-turn’ on its controversial decision to axe the Winter Fuel Payment for all pensioners, except those who claim pension credit.
‘And although the increase to the state pension should help meet next year’s bills, it doesn’t help those who will be living close to the edge of their means this winter.
‘The triple lock guarantee has worked well in the favour of pensioners over the recent past, boosting the state pension by 28 per cent over the last four years.
‘But with the state pension edging ever closer to the frozen personal allowance of £12,570, and the concept of universal payment coming under increasing scrutiny, the Government will have to take the bull by the horns at some point to address who should get the state pension, at what age, and how much.’
Alice Haine, personal finance analyst at Evelyn Partners, says: ‘The bumper boost may feel comforting for pensioners still struggling with the fallout from the cost-of-living crisis, but heavy shadows cast by Labour’s pledge to ditch the winter fuel payment for all but the poorest retirees may take some of the shine off the news.
‘Throw in frozen tax thresholds, with the full new state pension edging ever closer to surpassing the standard personal allowance of £12,570 – the point at which any income is liable for tax – the potential loss of the winter fuel allowance and the threat that Housing Secretary Angela Rayner may abolish a council tax break for households with only a single occupant and it’s easy to see why pensioners feel under siege.’
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