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In the 2023 Autumn Statement, Chancellor Hunt announced that the State Pension would receive an 8.5% increase in April 2024. By doing so, he confirmed the continuation of the “triple lock” system (which was suspended in the 2022-23 tax year), much to the relief of many pensioners. However, what will pensioners get from the State Pension in April 2024 and what might lie ahead as we approach the next general election?
Below, our Burnley financial planners offer some reflections on these important questions. We hope these insights are helpful to you. Please get in touch for more information or to discuss your own financial plan with us.
What State Pension will I get in 2024?
The standard weekly payment for those currently receiving the full new State Pension (in 2023-24) is £203.85 – equating to £10,000.20 per year. When the next tax year begins on 6 April 2024, this is set to increase by £17.35 per week.
This means that the full new State Pension should be £902.20 higher in 2024-25 compared to the current tax year; a total of £11,502.40.
Those who reached their State Pension age before April 2016 (when the new State Pension was introduced) will get £13.30 more per week.
The 8.5% increase announced by the Chancellor means that the State Pension will rise in line with average UK earnings (which are now beating inflation).
Some important caveats
Be careful not to assume that these figures necessarily represent what State Pension you will get in April 2024. The precise income you are entitled to may vary depending on your circumstances. For instance, those with an incomplete National Insurance (NI) record – i.e. those possessing less than 35 “qualifying years” of NI contributions – will not be entitled to it.
Those who have deferred their State Pension (delaying taking any income after reaching their State Pension age) may also be facing different figures. For every 52 weeks of deferral, an individual can increase their State Pension by 5.8%. This is on top of any increase to the State Pension arriving via the triple lock system.
To accurately calculate your State Pension entitlement in 2024-25, check your NI record using the UK government’s online portal. Consider speaking with a financial adviser if you are unsure or if you want to discuss ideas to expand your entitlement (e.g. making voluntary NI contributions to plug “gaps” in an incomplete NI record).
Looking ahead
The planned 8.5% increase to the State Pension is the biggest since at least 2011-12 (setting aside the exceptional 10.1% rise in 2023-24). In that time, annual rises have ranged between 2.5% and 5.2%.
The last two tax years have been unusual particularly due to high inflation figures (partly caused by COVID-19 and the war in Ukraine), leading to even higher strain on the public finances. The 2023-24 increase to the State Pension added £11bn to government spending. The upcoming 8.5% hike will also add £2bn to the Office for Budget Responsibility (OBR) forecast last Spring.
These high figures are leading politicians to increasingly question whether the triple lock system is still fit for purpose. It is not a legal requirement; the government has suspended it before (in 2022-23) and is only obligated to increase the State Pension at least in line with average earnings each year. If the State Pension keeps rising by such high levels – e.g. 8% or more annually – then there are concerns that it could become unaffordable.
With a UK general election due before January 2025, both political parties are trying not to “blink first” on this important topic. The Conservative Party will be keen not to upset pensioners (who are more likely to vote – and for them) and Labour will be aware that 26% of the UK population rely on the State Pension for their retirement income.
There is also a “ticking time bomb” with the State Pension and the Personal Allowance. Currently, an individual can earn up to £12,570 per year without paying any income tax. However, if the State Pension keeps rising in line with recent increases, it will not be long before the income itself starts taking many people over their Personal Allowance (which has been frozen until April 2028). This will likely create a headache for the next government, whichever party wins the next election.
It seems plausible to assume that the State Pension triple lock system – introduced in 2010 under the then coalition government – will not remain in its current form forever. One possible future outcome could be that Pension Credit is increased instead to provide benefit support to lower-income pensioners (e.g. for rent, heating and council tax). However, only time will tell whether a government is willing to expend the considerable political capital needed for reform.
Invitation
If you are interested in starting a conversation about your own financial plan or investments, then we’d love to hear from you.
Please contact us to arrange a free, no-commitment consultation with a member of our team here at Elmfield Financial Planning in Padiham, Burnley, Lancashire.
Reach us via:
T: 01282 772938
E: info@elmfieldfp.co.uk
