Millions to get state pension pay rise next year after winter fuel payment axe as Rachel Reeves confirms triple lock
MILLIONS of pensioners will see their state pensions rise next year after the Chancellor confirms the triple lock will remain in place.
It means pensioners are guaranteed a pay rise of at least 2.5% next April, but current forecasts suggest they’ll receive an even bigger boost.
It comes after Rachel Reeves ignored calls to reverse her decision to cut winter fuel payments this morning.
The benefit, worth up to £300 this winter, will only be available to those on certain means-tested benefits, including pension credit, leaving 10million state pensioners worse off.
But the Chancellor defended the move, repeatedly telling MPs that increases to the basic state pension already mean that people are “£900 better off” than a year ago.
State pension payment rose by 8.5% in April.
However, Labour MP Rachael Maskell disagreed and warned that the average rent rise in York of 11.9% exceeded the state pension rise by £380 this year.
In response, Ms Reeves said: “The basic state pension is worth £900 more than it was a year ago and will go up again in April next year because of the triple lock, which we have committed to for the duration of this Parliament.”
Under the triple lock, the state pension is uprated each year in April by the rate of inflation for the previous September, wages or 2.5%, whichever is higher.
According to the Office for National Statistics (ONS), total earnings, including bonuses, increased by 4.5% annually in June.
Experts say this is a significant indicator of how much payments will rise.
Steven Cameron, pensions director at Aegon, said: “The latest official average earnings figures (including bonuses) show an annual increase of 4.5%, compared to 5.7% a month ago.
“While not yet certain, this gives the best indication yet of by how much the state pension will increase next April under the triple lock, which the Labour government has confirmed will remain in place.”
This means that in April 2025, the full state pension could rise by around £517 a year if wage growth remains at 4.5% when July’s annual growth figures are released later this month.
This figure is both greater than 2.5% and the rate if inflation, which is currently 2.2% and expected to remain around this level.
It means that the wage growth figure will most likely be used to determine next year’s state pension uprating.
However, households will still need to wait until September 10 to learn exactly how much their state pension will rise by in April 2025.
The full rate of the new state pension is currently £221.20 a week – or £11,502.40 a year.
This is what the state pays those who reach state pension age after April 6, 2016.
Under the old system, the full basic state pension is £169.50 per week or £8,814 a year, and it is paid to those who retired before April 6, 2016.
How does the state pension work?
AT the moment the current state pension is paid to both men and women from age 66 - but it's due to rise to 67 by 2028 and 68 by 2046.
The state pension is a recurring payment from the government most Brits start getting when they reach state pension age.
But not everyone gets the same amount, and you are awarded depending on your National Insurance record.
For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings.
The new state pension is based on people’s National Insurance records.
Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension.
You earn National Insurance qualifying years through work or by getting credits, such as when you care for children and claim child benefit.
If you have gaps, you can top up your record by paying in voluntary National Insurance contributions.
To get the old, full basic state pension, you will need 30 years of contributions or credits.
You will need at least 10 years on your NI record to get any state pension.
PAYMENT BOOST ON THE WAY
If wage growth remained at 4.5% when the next round of figures is released next month, the new state pension would get a boost of around £517.
For those on the new state pension, weekly payments would rise by £9.95 a week to £231.15 – up from £221.20.
An increase of 4.5% would bring the yearly new state pension to £12,061 a year.
For those on the full basic state pension, payments would rise by £7.63 a week to £177.13.
An increase of 4.5% would bring the yearly basic state pension to £9,210.76 a year.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Such a rise will be welcomed by pensioners still emerging from the cost-of-living crisis.
“However, with many still reeling from the news that their winter fuel payment is to be taken away, it won’t be quite the boost that many hoped for.
“There’s another looming challenge – frozen tax thresholds mean that the full new state pension is creeping ever closer to tax paying territory and a similar rise next year could see it surpass it.
“With these freezes in place until 2028, there’s every chance, we could see pensioners solely reliant on the state pension finding part of it is making its way to the taxman.”
CLAIMING THE STATE PENSION
YOU won't automatically get the state pension when you reach 66 - you need to claim it once you're eligible.
You should receive a letter explaining what to do no later than two months before you reach state pension age.
You can apply for the State Pension online by visiting www.gov.uk/get-state-pension.
You can choose to defer getting the state pension – you don’t have to take it as soon as you are eligible when you reach state pension age.
Leaving your state pension untouched can boost the amount you eventually get.
If you opt to defer your state pension, your entitlement increases by the equivalent of 1% for every five weeks you do so.
As the state system can be tricky to navigate, requesting a state pension forecast is a key part of pension planning.
This will help you understand how much you could be eligible to receive and at what age.
View your state pension forecast by visiting www.gov.uk/check-state-pension.