With the latest news on inflation figures making headlines, Aegon states that State Pension is on track for inflation-busting, second-largest ever Triple Lock increase. Steven Cameron, Pensions Director at Aegon has commented on the news below:
Steven Cameron, Pensions Director at Aegon, says:
“Today’s official figures from the Office for National Statistics showing year-to-September inflation of 6.7% has turned the heat up ahead of the Government’s official announcement, due next month, of next April’s State Pension Triple Lock. All signs point to a bumper year for State Pensioners, but coming at considerable cost to today’s workers.
The official formula calculates the Triple Lock as the highest of year-on-year earnings growth for May to July (announced as 8.5% in August), a minimum rate of 2.5% or the 6.7% year-to-September inflation figure published this morning. This would see the State Pension increase by 8.5% for 2024/25.
There are reports that the Government is considering adjusting the earnings growth figure downwards to reflect recent one-off public sector bonuses which have created a ‘distortion’. While trimming it back by up to 1% would save the Government money, it would risk the wrath of the pensioner population ahead of a likely General Election next year.
An 8.5% increase would be the second-largest State Pension increase ever, after this April’s 10.1%, and would see the New State Pension jump by a bumper £901.02 to £11,501.22 a year. The ‘old’ State Pension, for those who reached State Pension age before 6 April 2016, would also rise by £690.40 to £8,812.80.
But the boost is particularly large when considered in comparison to current inflation trends.
While the year on year inflation was unchanged this month from last, it had previously decreased for three consecutive months, with the Government committed to reducing it to around 5% by the end of the year. This is still far above the Bank of England’s 2% target, so the headline rate may fall even further as we head into the early months of 2024. So a State Pension increase of 8.5% could well be double the ruling rate of inflation come next April.
While an 8.5% increase would be welcome news for State Pensioners’ purchasing power, it would do little to quieten the growing concerns that the Triple Lock in its current form is unsustainable longer term. With the burden on current workers who pay for the State Pension through National Insurance increasing sharply, even if the Government refrains from fiddling with the figures this time round, today’s inflation figure will only amplify calls for whoever is in power after the General Election to review the Triple Lock to make it intergenerationally fair.”
