UK State Pension: Millions of British elderly pensioners are expected to receive a small to significant increase in their state pension next April. This increase falls under the government’s renowned ‘triple lock’ policy, which sees the state pension increase annually in April by the greater of inflation, average wage growth, or 2.5%.
Recently released labor market data shows that average earnings rose by 4.7% in the three months to July, exceeding inflation of 3.8%. This means that next year, if confirmed in the autumn budget, the state pension is likely to rise by 4.7%.
For recipients of the full new state pension, this increase could go from £230.25 weekly to £241.05, boosting annual earnings by £561.60 and bringing the total pension to £12,534.60. Meanwhile, the full basic state pension could rise from £176.45 to £184.75 per week, resulting in an annual increase of £431.60.
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A slight difference for older pensioners
This difference means that recipients of the basic state pension could receive approximately £130 less annually than pensioners under the New Pension Scheme. The basic state pension applies to men born before April 6, 1951, and women born before April 6, 1953. This means that men in this group are now at least 74 years old, and women at least 71 years old.
Many older pensioners are also eligible for the Additional State Pension, formerly known as the State Earnings-Related Pension Scheme (SERPS). This pension increases each year based on inflation and provides a source of additional income for pensioners.
In some cases, pensioners receiving SERPS may be better off than those receiving the new State Pension. According to an analysis by Money Mail in 2024, pensioners who retired in the 1980s and 1990s could earn up to £20,176 annually, far more than the new pension rate.
Disparity in Pension Increases
This disparity in core pension rates means that millions of older pensioners will receive a lower increase than younger pensioners under the new scheme. There are approximately 12.7 million pensioners in the UK, and an estimated 9 million are over the age of 70. This means that a significant proportion of older British citizens will feel the impact of this difference.
Former Pensions Minister and LCP Pensions Advisor Steve Webb told MoneyWeek, “People are often surprised to learn that different elements of their State Pension can increase at different rates. The famous ‘triple lock’ promise only applies to the old ‘Basic’ Pension and the new flat-rate pension, but not to the State Second Pension or SERPS.”
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Preparing for the Future
As soon as the government announces the Autumn Budget, pensioners will see how much their weekly pension has increased. Older pensioners, in particular, need to know how different parts of their pension increase so they can better plan their retirement financially.
Many pensioners are likely to receive welcome increases next year due to inflation and wage increases, but the difference between new and old pensioners shows how complex and evolving the UK state pension system is.