State pension could see inflation-beating increase in 2024 as wages soar
11th July 2023 13:39
by Alice Guy from interactive investor
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Timing of state pension changes may mean pensioners feel just a little bit richer next year. Our head of pensions and savings explains why.
Stubbornly high wage inflation could have a direct impact on pensioner incomes from April 2024 as wage inflation is one of the factors in determining the state pension triple lock. The latest wages inflation figure for March to May was 7.3%, which, if sustained over the summer, would boost the state pension from £10,600 to £11,373 next year.
Both of the main political parties are committed to the triple lock next year. That means, we are now closing in on the time when the state pension increase for next year, that kicks in on 6 April, is set in stone.
The key figures to watch out for are increases in regular wages between May to July and CPI inflation for September, the highest of which will be used to boost the state pension from April 2024.
The Bank of England is currently forecasting inflation to be 7% in September, but the latest wage inflation figure of 7.3% potentially nudges the state pension even higher.
UK inflation, as measured by the Consumer Prices Index (CPI), was unchanged in May at 8.7%.
Around 4 in 10 pensioners are surviving on the state pension alone, so it will be a huge relief if the state pension increases almost £800 to £11,373.
Many current pensioners have little or no private pension wealth as they worked before compulsory workplace pensions were introduced in 2012. Women are less likely than men to have private pension wealth and they are also more likely than men to be living in poverty in retirement.
But even a 7.3% rise won’t be enough for many pensioners as poorer households spend more of their disposable income on essentials like food and energy. There are many older pensioners currently on the previous state pension system, where a basic state is only £8,122, potentially increasing to £8,714 next April.
If you’re a pensioner struggling on a low income, then it’s important to check if you qualify for pension credits or any other benefits. Pension credits work by boosting your income to £201 each week, or £306 for couples. Receiving pension credit also means you could be eligible for other valuable help like a reduction in council tax, cost of living payments and housing benefit.
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