Retirement payment to rise by up to 2.5% - provided you are eligible.
Retirees are set to get a boost to their state pension income next month.
The start of a new tax year on 6 April will bring in a new level of state pension, which kicks in from 12 April.
The full state pension is scheduled to rise by 2.5%, from £175.20 per week to £179.60.
That is an extra £228 a year for those eligible for the maximum pension. However, the amount of pension you get depends on your age.
A man born on or after 6 April 1951 and a woman born on or after 6 April 1953 can claim the new state pension, which pays the most.
Not everyone gets the full rate though, and you need 35 qualifying years of national insurance payments to get the full figure, although you can buy more years if you are short.
- State pension set for biggest hike in 10 years
Men born before 6 April 1951 and women born before 6 April 1953 only qualify for the basic state pension, which is lower, at £134.25 per week currently.
Both are increased using a calculation known as the ‘triple lock’.
This sets how much the state pension will increase by at the start of the tax year in April by taking the higher of average wages, the consumer prices index or 2.5%.
The idea is that the state pension ensures retirees can keep up with the cost of living when they are no longer earning.
The triple lock is controversial though as it costs the Treasury, and the taxpayer, billions of pounds to maintain.
- Examine the pension saving habits of investors at different life stages
- Don’t be shy, ask ii…how do I value my final salary pension schemes?
- For more pension news and investment insight click here
There are also fears that it could get more expensive, especially as forecasts from the Office for Budget Responsibility suggest wages could grow by 4.6% later this year as the UK emerges from lockdown restrictions.
That would see the state pension rise by 4.6% in April 2022.
Robert Salter, an adviser for accountants Blick Rothenberg, warns that sticking with the triple lock risks being seen as unfair by younger generations who may have lost jobs during the pandemic or are suffering from lower wage growth.
He says: “If it isn’t careful, the government could end up tied to the triple lock indefinitely – as a type of sacred cow of UK politics.
“As such, it would be sensible for the government to clearly review the triple lock and provide a clear indication where it is going from a longer-term state pension perspective and how long it is reasonable to retain the triple lock for.”
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.