An inflation-busting 4% state pension uplift is forecast for April 2020 under the ‘triple lock’ system
Pensioners are set to see a 4% increase in the state pension in October, more than double the current inflation rate of 1.7%.
Under the “triple lock” rules for state pension increases, the state payout will rise by whichever is the highest of consumer price inflation (year to September), earnings growth (year to July), or 2.5%.
The increase will be confirmed when the CPI figures for September are released in mid-October, but the most recent CPI figure (for August) is 1.7%, down from 2.1% at the end of July and seems very unlikely to leap beyond 4%.
If the forecast 4% rate is used, pensioners will enjoy their biggest uplift since April 2012, when it rose by 5.2% on the back of earnings growth. Since then, the annual increase has been in the 2-3% range.
Since the triple lock was introduced in 2011, state pensions have outstripped both prices and earnings.
Insurer Aegon has calculated that a single person receiving the old basic state pension – £97.65 back in April 2010 – is now receiving £129.20, an increase of 32%, while prices have increased by 24% and average earnings by only 20%.
That sum will rise to £134.35 from April 2020, assuming the 4% rise takes effect. Those who reached state pension age after April 2016 and therefore receive the new state pension will see their income rise from £168.60 to £175.35.
However, the triple lock is an expensive arrangement for the government and there is no guarantee that it will continue beyond 2022.
Government figures indicate that if the triple lock continues indefinitely, pension spending is set to rise by £35 billion over 40 years from 2020-21. Without it, or under just earnings indexation, the increase will be only £21 billion.
Steven Cameron, pensions director at Aegon, comments: “Based on the latest earnings growth figures, it looks like state pensioners can look forward to an inflation-busting 4% increase in their state pension from next April.
“However, these inflation-busting increases do come at a significant cost. The state pension is not funded in advance so pensions are funded on a ‘pay as you go’ basis from today’s workers’ national insurance contributions.
"With the prospect of an early general election, it will be interesting to see where each party stands on commitments to retaining the triple lock for the next five years.”
This article first appeared on our sister website Money Observer
Gap widens between old and new pensions
Each year the gap between the old state pension and the new state pension gets wider, those on old pension £129 should receive the same increase as those on new pension £168 unless they get GPC or opted out. Those on the old pension are going to get poorer each year unless on GPC then they are better off than both pensions as they get the £168 plus a host of other benefits and freebies. Why should someone on £168 GPC get free TV licence but those on £129 have to pay for theirs, those on GPC should not qualify for any further benefits or help, many never paid into system or paid in less than 35 years, those on old pension are worst off after paying in for 50 years, what a rip off system, if it was a private insurer doing this they would get hammered by the government.
State pension age rising to 75
Most people work hard all their lives only to be told they have to work another eight years. It seems one rule for the poor and one for the rich. MPs get paid well, have what I consider an easy life and get a good pension. How many of them will retire at 75?
Retirement age to 75
Absolutely disgusting if they do this.
This won't happen - you have…
This won't happen - you have to presume it's a lie coming from a Tory - There's an election coming up and they want more of the elderly vote, as the young are more likely to vote Labour. This is so they have more time to hammer the low income to make the rich richer.
If it does go up they'll take it away with taxes elsewhere - you should all know by now how the Tory party works - give with one hand takes twice as much with the other
As it has been said no guarantee that it will continue beyond 2022. It does nothing to address the ever widening gap on frozen pensions, in fact makes it much worse and without triple lock everyone will be in the same boat. What needs to be addressed is the missing money from the pension pot....both parties in government have been guilty of this!