The state pension increases each year in line with the triple lock policy. This guarantees it goes up each year, in line with the highest of 2.5 percent, inflation or the rise in average earnings.
Currently, the full new state pension is worth £10,600 a year following a 10.1 percent inflationary figure in September 2022.
The Bank of England forecasts suggest inflation will stay high and average seven percent in the third quarter of 2023, meaning next financial year state pensioners could get a sizeable increase.
The current full basic state pension is £156.20 a week, or £8,122.40 a year, while the full new state pension is £203.85 a week, or £10,600.20 a year.
If there was a seven percent increase, the full basic state pension would go up to £167.13 a week, or £8,690.76 a year.
The full new state pension would go up to £218.12 a week, or £11,342.24 a year, providing an annual increase of more than £700 a year.
A person can check how much state pension they are on track to receive using the state pension forecast tool on the Government website.
Unfortunately, pensioners who live abroad in certain countries see their payments frozen, which results in their state pension payments falling in real terms year on year.
The reason behind this is what is known as the frozen pension policy, which impacts British pensioners who have moved to certain countries overseas.
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The state pension is only guaranteed to be uprated in the following places:
- The UK
- European Economic Area (EEA)
- Gibraltar
- Switzerland
- Countries with a social security agreement with the UK (but not Canada or New Zealand).
While an inflation-linked state pension is welcomed by many pensioners, an estimated 500,000 will miss out on this increase due to not living in an eligible country.
Figures compiled by End Frozen Pensions have shown the impact on expats.
The increase to a weekly rate of £156.20 for the basic state pension and £203.85. for the new state pension will mean that a ‘frozen’ pensioner, who has made the full contributions, will miss out on:
- £2,394.60 if they retired in 2013
- £4,095.00 if they retired in 2003
- £5,306.60 if they retired in 1993
- £6,351.80 if they retired in 1983.
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The lifetime losses of a ‘frozen’ state pension who has made contributions in full, would be as follows:
- £10,098.92 if they retired in 2013
- £35,529.52 if they retired in 2003
- £66,245.52 if they retired in 1993.
On the End Frozen Pension’s website, they explained Anne Puckridge’s situation as her pension does not increase in with inflation.
The 95-year-old served in the Second World War and worked in the UK up until the age of 76.
She paid her National Insurance in full, but Anne’s pension was ‘frozen’ at £72.50 per week when she left the UK for Canada to be closer to her daughter and grandchildren.
Her pension doesn’t increase in-line with inflation, so it falls in real value year-on-year. If she had stayed in the UK, she would be getting £134.25 per week.
There are over 520,000 British pensioners in similar positions, most of whom live in Commonwealth countries, where as other countries like America and the Philippines are unaffected.
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