State pension will rise 8.5%

The triple lock means older people will get an 8.5 per cent boost to the state pension next April, the Chancellor finally confirmed in today’s Autumn Statement.

That means the headline full rate state pension will increase to £221.20 per week – up £902 a year to around £11,500.

The basic rate for people who reached state pension age before 2016 should be £169.50 a week, up £692 a year to around £8,800.

Those on the basic rate also get hefty top-ups, called S2P or Serps, if those were earned earlier in life.

We explain how the triple lock works below, how much it has added to state pensions – and why the rise was in doubt.

Triple lock state pension rise is finally confirmed 

Pensioners will be relieved Jeremy Hunt honoured the ‘triple lock’ pledge, which means the state pension should increase every year by the highest of inflation, average earnings growth or 2.5 per cent.

The Government was widely expected to keep this promise to older voters ahead of an election, even though inflation is now easing and fell to 4.6 per cent in the year to October.

However, there was some concern the Chancellor could try to fudge the earning figures to deliver a lower a state pension increase.

This year wages growth, including bonuses, was 8.5 per cent and therefore determined the next triple locked state pension rise.

But there was speculation the Government might say recent NHS and civil service bonuses had skewed the figure, and minus this factor the increase would have been 7.8 per cent.

The Government has form on this because it scrapped the earnings element from the state pension rise in April 2022, after wage growth was temporarily distorted to more than 8 per cent due to the pandemic.

The move outraged pensioners, and the Government reverted to using the triple lock when deciding the most recent state pension increase.

How much will the state pension be from April? 

Today’s confirmation of a 8.5 per cent triple lock rise means the following for pensioners:

The full state pension will increase to £221.20 per week – up £902 a year to around £11,500.

The basic rate for people who reached state pension age before 2016 should be £169.50 a week, up £692 a year to around £8,800.

How much has the triple lock added to pensions? 

The guarantee has ensured that pensioner incomes get a decent boost each year.

The 2.5 per cent element keeps pushing the rate higher even in years when earnings and inflation are flat. The table below shows that it has kicked in four times over the years.

How much is the state pension now?

Last autumn, the inflation rate was 10.1 per cent, which prompted a hike in the full rate state pension to £203.85 a week or £10,600 a year from April 2023.

Those on the basic rate get £156.20 a week or £8,120 a year.

However, the old basic rate is topped up by additional state pension entitlements – S2P and Serps – if they were earned during working years.

Our pensions columnist Steve Webb explains here how different elements of the state pension are raised, such as graduated and SERPS – for those who earned them in the past.

Why is the state pension triple lock controversial?

Critics point out that maintaining the triple lock is expensive when public finances are in a straitened state, and some question whether the elderly should get a bumper state pension increase when workers are handed below inflation pay deals.

Supporters say that unlike with the temporary wage growth spike after the pandemic, pensioners are currently struggling with the very real challenge of high inflation while on a fixed income.

Many depend solely on the stage pension, and are having a tough time paying sky-high food and energy bills.

The UK also has the lowest state pension among rich countries based on one of the most cited international measures.

However, that does not tell the whole story because some nations roll their state and workplace pensions into one system.

Aside from the moral case and fairness argument in favour of a full hike, elderly people tend to vote in high numbers.

None of the major political parties want to upset this key voting bloc by denying them a decent state pension increase. 

How much does the state pension cost? 

The cost is rolled into other spending on pensioners, including housing benefit, pension credit and winter fuel payments, as well as the state pension.

The Office for Budget Responsibility says this totalled £126.4billion in 2022/23 and is expected to hit £142.1 in 2023/24 and £153.billion in 2024/25.

In the OBR’s latest report, published alongside the Autumn Statement, it says: ‘Welfare spending is forecast to rise sharply this year (by £33.9 billion, or 13.0 per cent) and next (by £21.1 billion, or 7.1 per cent), driven by the uprating of most benefits with CPI inflation,’ it says.

‘The main drivers are health and disability benefits (reflecting rising caseloads for these benefits), and pensioner spending (due to the ageing population and the triple lock).

When did the triple lock start?

The triple lock was introduced by David Cameron’s Conservative Government in the 2011/2012 financial year, to ensure pensioners receive a decent rise in income every year.

Before that state pensions were increased in line with price inflation, going back to 1980. This infamously once led to a 75p increase, which caused huge anger against the Labour government in 1999 and the early 2000s.

Since then all Governments and Oppositions have tried to avoid a repeat of this damaging row when announcing plans for state pension increases.

Will the triple lock survive the election?

Pressure on public finances might force a change at some point, perhaps to a double lock system.

However. it is most unlikely either the Tories or Labour will go into the election with a manifesto promise to ditch the triple lock.

That is, unless they decided to ‘jump together’. Again, unlikely. Neither will want to forfeit any advantage they can get to appeal to older voters.