Since 2010, the State Pension triple lock has protected the real value of the State Pension for millions of older people in the UK.
As the State Pension is a guaranteed sum that rises in line with economic circumstances over time, it is often a highly useful source of income for British retirees.
While your retirement income might come from several sources, such as the private or workplace pensions you’ve accrued during your career, it’s important that you consider your State Pension, too.
Although Treasury officials have recently considered scrapping or freezing the triple lock in 2024, prime minister Rishi Sunak looks set to keep the policy in a bid to shore up voter support ahead of next year’s general election.
If the policy remains, the State Pension may well rise by a significant margin next year. So, keep reading to find out how the triple lock guarantee could affect how much you receive.
Understand when you could receive your State Pension and how much you could get
The current State Pension Age for both men and women is 66. However, for those born on or after April 1960, the age will rise to 67 in 2026. Between 2044 and 2046, those born on or after April 1977 will see the age rise to 68.
Once you reach State Pension Age, you will be able to claim your State Pension. The amount you can claim will depend on how many “qualifying years” you have.
You normally accrue a “qualifying year” by making a certain level of National Insurance contributions (NICs) or by claiming certain benefits. This could have been for caring for one or more sick people or being a registered foster carer.
To receive any State Pension, you must have at least 10 qualifying years of NICs. To claim the full State Pension of £203.85 a week in the 2023/24 tax year, you’ll need 35 qualifying years. You can obtain a State Pension forecast by visiting the government website.
As the State Pension is a guaranteed sum that rises in line with the cost of living, it could be a very useful bedrock to your income.
Indeed, by maximising your State Pension, you could give your retirement funds a real boost.
The triple lock guarantee typically inflation-proofs your income
Since 2010, the triple lock has ensured that the real value of the State Pension rises each year in real terms.
Calculated each September, the rise will apply at the start of the following tax year. This increase is based on the highest of three factors:
- Inflation
- Average earnings growth
- 2.5%.
Latest figures released by the Office for National Statistics (ONS) revealed that the UK inflation rate rose by 6.7% in the 12 months up to August 2023.
Additionally, the ONS reported in September 2023 that the growth in employees’ average total pay (including bonuses) was 8.5% between May and July 2023.
If the triple lock increases by the latest average earnings growth data, the State Pension could rise by 8.5%, up to £221.20 a week, from April 2024.
A decision on the triple lock may be delayed until closer to the general election
With the general election looming in 2024, prime minister Rishi Sunak is looking at ways of shoring up support.
While Treasury officials have been debating taking a one-off break from the triple lock, the negative voter reaction to the idea of axing the policy has led to hesitation from Conservative decision-makers.
Indeed, the Daily Express reports that Sunak is likely to keep the policy in his election manifesto.
If you are already receiving the State Pension, the maintenance of the triple lock will see your payments receive a substantial boost in 2024, after a 10.1% increase in 2023.
If you’re yet to reach State Pension Age, the increases are essentially “baked in” to the value of the pension, increasing the amount you can expect to receive from age 66 or 67.
Get in touch
If you want to ensure that you can live the retirement lifestyle you want, or you’re not sure whether you’re on track to save enough for later life, get in touch to find out how we can help.
Please email admin@stonegatewealth.co.uk or call 01785 876222.
Please note
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.
The Financial Conduct Authority does not regulate cashflow planning.
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