In a promising development for retirees, the UK state pension 2024 is slated to surge by a substantial 8.5% starting from April 2024. This boost aligns with the recently released average earnings growth data, as reported by the Office for National Statistics (ONS).
Additionally, this significant increase can be attributed to the ‘triple-lock’ policy, which ensures that the state pension rises by the highest of three factors: average earnings growth, inflation, or a minimum of 2.5% each year.
Furthermore, assuming the current earnings growth figure is applied to the triple-lock, here’s what retirees can expect:
A Big Boost for Retirees
Here, it’s worth noting that if the new UK state pension had increased in line with either inflation or wages since 2011, it would be worth approximately £180 per week today. This difference translates to an additional £11 billion per year in public spending, according to the Institute for Fiscal Studies (IFS)
Growing Pension Expenses
In the fiscal year 2022/23, the government allocated £110 billion to state pensions. Projections from the Office for Budget Responsibility (OBR) indicate that real-terms UK state pension 2024 spending is expected to rise by a staggering £23 billion by 2027/28.
For this, experts have stated that retirees are on track to receive their second substantial state pension increase consecutively, all thanks to the government’s ‘triple-lock’ policy.
They believe that with inflation seemingly under control, it’s highly likely that the current 8.5% earnings growth figure will be the determining factor for next year’s state pension rise.
If this holds true, it will mean that the full new state pension will reach £221.20 per week, while recipients of the old state pension will witness their benefits increase to £169.50 per week.
Even from the government’s perspective, the ‘triple-lock’ policy significantly impacts state pension expenses, potentially costing the Exchequer an additional £11 billion compared to a ‘double-lock’ based on earnings and inflation, according to the IFS.
Looking ahead, this policy could lead to annual state pension spending increases ranging from £5 billion to £45 billion by 2050.
Challenges for Savers
The lack of certainty regarding future increases poses challenges for savers planning their retirement. As the ‘triple-lock’ bolsters the UK state pension’s value, it makes other cost-saving measures, particularly future state pension age increases, more likely.
What’s more, the ‘triple-lock’ policy faces criticism for its lack of a clear goal, essentially elevating the state pension’s real terms value whenever inflation and earnings growth fall below 2.5%. This approach leaves the government vulnerable to inflation or earnings spikes, a vulnerability that recent years have exposed.
Again, what individuals of all ages need from the government is policy stability regarding the state pension. Ideally, this would entail cross-party agreement on the income the UK state pension 2024 should provide during retirement and the proportion of one’s later years spent receiving the state pension. Consideration should also be given to developing smoothed earnings and inflation metrics to deliver less volatile annual increases.
Currently, there is a dearth of meaningful dialogue on state pension policy, with the ‘triple-lock’ serving as a symbol of ‘doing right by older people.’ Breaking this cycle may necessitate an independent review of the state pension to lay the groundwork for a consensus on its long-term structure.
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