Steven Cameron, Pensions Director at Aegon, comments on the news: “Today’s drop in the inflation figure from 3% to 2.8%, coinciding with the Spring Statement, will be welcome news for the Chancellor. But all eyes will be on the trend in coming months, to see if the hike employers face in National Insurance bills from 6 April will lead to increased prices. These figures come less than two weeks before state pensioners will receive a 4.1% increase to their new or basic state pension, meaning they’re on course for an above-inflation boost.
“The triple lock increases the state pension by the highest of year-on-year earnings growth for the previous May to July period, consumer price inflation as at the previous September, or a minimum of 2.5%. This year, the 4.1% increase is based on the earnings growth component. There’s a considerable gap between the increase being set and it coming into payment the following April. But this year, the increase remains above the latest inflation figure, protecting pensioner purchasing power. For someone on the full new state pension, this equates to an increase of £9.10 from £221.20 to £230.30 per week, or £11,975.60 per year.
“For those who reached state pension age before 6 April 2016 and are therefore on the basic state pension, the increase will be £6.95, bringing income up to £176.45 per week, or £9,1755.40 per year. While a 4.1% boost is down on the past two state pension increases of 10.1% (April 2023) and 6.7% (April 2024), it still represents the fourth-highest jump since the triple lock was implemented in 2011. However, under a little-known rule, those entitled to an earnings-related pension on top of their basic state pension, relating to the pre-April 2016 rules, or who have topped up their state pension by paying extra National Insurance contributions, will see these elements increased in line with last September’s rate of inflation at just 1.7%.”
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