Interactive Investor

State pension to hit £11,501 in 2024

8.5% wages growth locks in state pension rise, writes Alice Guy.

12th September 2023 07:50

by Alice Guy from interactive investor

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Wage growth between May to July 2023 published by the Office for National Statistics (ONS) today means that the state pension looks set to hit £11,501 in April 2024, a 8.5% rise compared with the current tax year, up from £10,600 this year.

Key stats relating to triple lock:

  • State pension is set to rise by 8.5% next year, from £10,600 per year this year to £11,501 next year, a weekly rise from £203.85 to £221.17.
  • Older pensioners who retired before April 2016 will get a weekly rise from £156.20 to £169.47, and an annual rise from £8,122 to £8,812.
  • Wages data showing a 8.5% increase in total pay (including bonuses) from May to July 2023 looks set to be the determining factor for the triple lock this year as CPI inflation is currently lower than wage inflation, and September’s inflation figure is widely expected to be below the current figure for wage inflation.
  • The triple lock is based on the highest of total wage inflation between May to June, CPI inflation in September (announced in October) and 2.5%.
  • Higher than expected wages data reflects surging wage inflation during the summer both in the private and public sector, including the NHS one-off bonuses of at least £1,250 per person in June.
  • Today’s wage rise data is slightly higher than last month’s data – average wages between April to June were 8.2%
  • The state pension has risen £3,158 in real terms since 2011 when the triple lock was introduced (interactive investor calculations comparing basic state pension in 2010 compared to current new state pension of £10,600) but is still one of the lowest in Europe.

Alice Guy, Head of Pensions and Savings, interactive investor says: “The triple lock increase is great news for millions of pensioners, providing a lifeline to many poorer households. One in eight pensioners don’t have any income in addition to the state pension and are completely dependent on the triple lock to help them cover their rising costs. Women are particularly likely to rely solely on the state pension, especially if they are on their own, as many have taken time out from the workplace, which makes it harder to build up a workplace pension.

“It’s important to remember that, even with the triple lock, the UK state pension is still one of the lowest in Europe. Many other countries have a state pension system based on the amount you pay in, rather than a simple flat rate. That means UK pensioners are hugely reliant on workplace pensions to supplement their state pension income. But not everyone has access to a workplace pension. Those who are long-term carers, disabled or simply self-employed often end up with the rough end of the lollipop when it comes to retirement incomes.”

“Most pensioners actually receive less than the headline rate. Older pensioners who retired before April 2016 receive an older-style basic pension, that will only rise to £8,812 next year. Likewise, pensioners who don’t have a full National Insurance record also receive less.

“The government has a difficult balancing act ahead as it weighs up an increasingly expensive state pension bill, with the needs of pensioners, a significant minority of whom are still living in poverty. One option would be for the government to consider using longer-term averages, rather than short-term data to determine the triple lock. This would reduce the risk of the triple lock being skewed by short-term trends.”

“The triple lock was introduced in 2011 to ensure that pensioner incomes kept pace with inflation and wages. The policy has successfully raised the level of the state pension by £3,158 in real terms since 2011.”

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