This rule ensures that state pensions rise each year in accordance with the highest of the following: average annual earnings growth from May to July, CPI inflation in the year to September, or 2.5 per cent.
This April, both the new and basic state pensions saw an 8.5 per cent increase. As a result, someone on the full New State Pension for those with a higher rate of National Insurance Contributions now receives £221.20, or £884.80 every four-week pay period during the 2024/25 financial year.
However, those with a lower rate of National Insurance Contributions, who are receiving the full Basic State Pension, will receive £169.50 each week, or £678 every four-week pay period, reports the Daily Record.
Recently, it was announced that the Consumer Prices Index (CPI) inflation dropped to 2.3 per cent in April, down from 3.2 per cent in March – marking the lowest level since July 2021 when inflation was recorded at 2 per cent, the target level set by the Bank of England.
Pensioners are likely to be keeping a close eye on inflation rates over the next few months, as this could determine how much their payments will increase. However, Steven Cameron, Pensions Director at Aegon, has explained that the triple lock could push payments up by as much as 5.7 per cent next April.
Steven said: “The specific figure used for determining the triple lock will be the year-on-year increase in earnings for the period ending May to July 2024, which will be published in September. Barring a significant drop in earnings growth over the next few months, this figure will likely determine next year’s triple lock.”
As highlighted by Steven, the triple lock is currently set to be determined by the earnings growth element, which stands at 5.7%. However, this figure could change and is not the final metric that will determine the level of uprating.
A 5.7% increase on the current State Pension would result in:
- Full New State Pension – £233.80 each week, £935.20 every 4-week pay period, £12,157.60 over the 2025/26 financial year – or £1001 per calendar month
- Full Basic State Pension – £178.40 each week, £713.60 every 4-week pay period, £9,276.80 over the 2025/26 financial year, or £773 per calendar month.
Steven continued: “If price inflation stays low and earnings growth also gradually falls back to levels more typical of the last decade, then the State Pension triple lock formula may produce more predictable and affordable increases.”
“This will make it less costly for the next Government to commit to maintain it for a further 5 years. We may see lower rates of increases, but in times of lower inflation, the State Pension doesn’t need to increase by as much to allow pensioners to maintain living standards.”
“However, rather than a three-way comparison year on year, we’d recommend averaging the earnings component over a three-year period, which could smooth out excessive volatility and help ensure intergenerational fairness.”