The state pension will rise by 8.5% from April 2024, as Jeremy Hunt said the Government would not abandon the “triple lock”.
Under the pension triple lock, the value of the state pension rises by the highest of inflation, wages or a flat 2.5%. But with wage growth hitting a record high over the Summer, questions were raised over whether the Government could continue to keep the measure in place.
The move brings the value of the state pension to £221.20 a week, or £900 a year.
Hunt said: “That is one of the largest ever cash increases to the state pension – showing a Conservative government will always back our pensioners.”
Sian Steele, Head of Tax at professional services and wealth management firm Evelyn Partners, said:
“This will be very welcome to those receiving, or about to receive, the state pension at a time of rising living costs.
“With an election on the horizon, the political consequences of tinkering with the triple lock might have figured in the Chancellor’s calculations. Whether the state pension can be increased in the same way over the long term alongside an ageing population is another question.
“With the inclusion of bonuses in the earnings element of the triple lock, many in the Treasury are probably lamenting a missed opportunity to save the public purse some extra outlay.
Phoenix Group’s Patrick Thomson, head of research and policy at Phoenix Insights said: “State pensioners will welcome news that the government has committed to maintaining the triple lock without adjustments. The triple lock has been an important policy to ensure retirees’ income has kept pace with rising prices or increases in the working population's wages, and today’s announcement means the state pension will rise by 8.5% next April.
“Decisions around the state pension carry huge significance given the impact on a large proportion of the electorate, so any adjustment to the triple lock could have led to wider political ramifications in the lead up to the next general election.
“Polling from Phoenix Insights found people of all ages believe the state pension exists to ensure everyone has a minimum level of income in retirement and 82% of adults said it should support older people who are unable to work.”
However, Kevan Ramanauckis, pensions technical specialist at Canada Life , noted that the change means that a pensioner will now be just £1,000 away from paying income tax based on their pension alone.
Alongside the "triple lock", Jeremy Hunt also announced a consultation on a "pension pot for life", allowing employees to request that their pension is paid into an existing pot from a previous job.
