Retirees set for second bumper State Pension hike as pay inflation soars

It appears that the State Pensions in the UK are expected to rise by 8.5 percent in April 2024. This increase is in line with the Triple Lock policy, which determines the State Pension increase based on the highest of three factors: average earnings – total pay including bonuses, inflation, or a minimum of 2.5 percent.

The Triple Lock policy ensures that the State Pension keeps pace with the cost of living and wage growth. In this case, the State Pension increase is set to match the growth rate of average earnings, which the latest statistics from the Office for National Statistics (ONS) recorded at 8.5 percent between May and July. Since inflation is unlikely to be higher than this rate, the State Pension is expected to rise in line with the growth in average earnings.

Annual rise of more than £900 for some

Basing the Triple Lock on these figures would see the new State Pension rise from £203.85 to £221.20 per week. The basic State Pension would increase from £156.20 to £169.50 per week.

The expected hike will follow on from the record 10.1 per cent increase rolled out in April 2023.

‘Headache for the Government’

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “We always thought inflation would be the key factor when it came to the Triple Lock, but soaring wages look set to outstrip it, with annual wage growth of 8.5 per cent.

“This has the potential of delivering a bumper state pension increase next year.

“Inflation has proved unpredictable and could rise again ahead of next month, but with it currently standing at 6.8 per cent it would need to be a truly enormous rise to outstrip what we are seeing here.”

The sustainability of the Triple Lock is under scrutiny due to the cost it poses to taxpayers. Research from the Institute of Fiscal Studies found that maintaining the Triple Lock could add as much as £45bn to the welfare bill by 2050.

Ms Morrissey said: “Such an increase will be welcomed by pensioners, who have gone through difficult times this year as the cost of living continues to lay waste to our finances.

“However, it will continue to be a headache for the UK Government who need to battle the ever-spiralling cost of the State Pension bill.”