BBC Money Box experts explain increases to State Pension
This is brilliant news for millions of pensioners and a milestone in the Daily Express campaign to fight for the future of the uplift mechanism.
This protection is vital as inflation runs red hot as it should protect pensioners from the cost-of-living crisis.
Last week, I reported that the state pension is now on course for a second inflation-busting hike in a rare piece of good news.
The triple lock increases pensioner payments each year either by inflation, earnings or 2.5 percent, whichever is highest.
In April this year it handed pensioners a 10.1 percent pay rise, based on last year’s September’s inflation figure, giving those on the new state pension almost £1,000 a year extra.
Next year’s increase, due in April 2024, is most likely to be based on September’s consumer price index again, as inflation looks set to stay high.
There is also a chance that the earnings element will apply, as wages have also been growing quickly, up 7.2 percent in the year to April.
Either way, forecasts suggest that pensioners could get a rise of around seven percent next year, and there’s even better news.
The Bank of England expects inflation to have fallen to 5.1 percent by the end of 2023, and continue sliding in spring 2024.
This means that if pensioners get a rise of around seven percent next April, it could outpace price growth at the time.
This shows why the triple lock is so important and now we have terrific news as Sunak has pledged to stick with it even if it gives pensioners a big pay rise.
Yesterday, Sunak’s spokesperson at No 10 said the PM was “committed” to the triple lock mechanism.
That’s despite a furious Cabinet debate over this year’s massive double-digit increase, which we now know almost never happened.
Some Ministers claimed it wasn’t fair to give pensioners such a huge increase while handing public sector workers smaller pay rises.
Yet Sunak is a man on a mission, which is to claw back lost ground against Keir Starmer’s Labour Party in a bid to win the next election, which will almost certainly be held next year.
He won’t stand a chance if he enrages pensioners, who are more likely to vote Conservative than anyone else.
“There are no plans to move away from the triple lock – we remain committed to it,” his spokesperson said, which must be music to pensioners’ ears.
When asked if another bumper triple lock hike might fuel inflation, the spokesman acknowledged that the Government has to retain fiscal discipline then added:
“We will consider how taxpayers’ money is used so that it doesn’t embed inflation. We know it is inflation in pay that tends to be more inflationary. We are committed to the triple lock.”
Pensioners have been rightly nervous about the fate of the triple lock, after Sunak suspended it for the 2022/23 tax year, when he was Chancellor.
That denied them an earnings-linked increase of 8.3 percent, handing them just 3.1 percent instead.
This caused fury as the increase landed in April 2023, just as inflation skyrocketed.
Today, the state pension pays £10,600 a year to those who retired after April 6, 2016, and qualify for the maximum amount.
An increase of seven percent would increase that by another £742 a year to £11,342.
Older retirees on the basic state pension will get the same percentage increase but it will apply to a lower starting income.
Today, the maximum basic state pension pays £8,122 a year, so a seven percent hike would increase that by just £569 to around £8,691 a year.
While many get additional state pension on top, they are still aggrieved by the difference between the two.
Especially since it widens with each percentage-based increase
That’s an argument for another day, though. For now, pensioners will be delighted by Sunak’s commitment.
Yet the Express won’t give up its campaign. As ever with politicians, you have to watch what they’re saying very closely.
Sunak has yet to commit to the triple lock beyond the next election, and there is a danger it could be scrapped in future.
However, neither the Tories nor Labour will want to go to the electorate while threatening to destroy pensioner incomes.
It could cost them millions of votes. Today, the triple lock looks safer than it has done for some time. It’s cause for (cautious) celebration.
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