State pension could rise 8.2% to £11,469...

Interactive investor calculations, based on today’s Office for National Statistics (ONS) wages data show that the state pension is set to rise 8.2% to £11,469 in April 2024, assuming wage inflation remains high in July.

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The state pension triple lock means the state pension will rise in April 2024 by the higher of CPI inflation in September 2023, average wage growth between May to July 2023 and 2.5%. July wages data is due to be released in September, but today’s ONS data shows that wage inflation was 8.2% between April to June 2023. If wages inflation remains high, then the state pension could rise £869 next April to £11,469. Pensioners who retired before 2016 and are on the basic state pension would see their pension income rise from £8,122 this year to £8,788 next tax year.

Inflation also remains stubbornly high, expected to average 6.9% in Q3 based on the latest Bank of England forecast. This compares with a lower level of inflation expected when the Department for Work and Pensions (DWP) set its budget in March, 5.4% on average for Q3 2023.

Interactive investor calculations, based on Office for Budget Responsibility (OBR), DWP and Bank of England forecasts show that the cost of the state pension triple lock could hit £10 billion in 2024. This is £4 billion higher than the DWP forecast in March and is due to higher-than-expected wage inflation and Bank of England inflation forecasts compared expected inflation at the time of the DWP forecast in March 2023.

Assumptions: calculations based on ONS wages data, DWP outturn and forecast tables, OBR forecast inflation, OBR March inflation forecast for Q3, August bank of England inflation forecast for Q3.

How we worked out calculations

Row 1 and 2: based on DWP outturn and forecast tables.

Row 3: state pension and cost of triple lock based on Bank of England inflation forecast Q3 and latest ONS average wages data (6.9% and 8.2%).

Alice Guy, Head of Pensions and Savings, interactive investor says: “The cost of the triple lock could reach an eye-watering £10 billion next tax year, assuming wage inflation remains high during July. The total state pension bill could hit over £138 billion next spring, with an annual increase of nearly £900 for someone on a full state pension who retired after April 2016.

“The current government and Labour party have both committed to the triple lock next year. But the cupboards are bare, with the tax burden at a record level. With an ageing population, the triple lock promise is becoming an increasingly expensive. The state pension is expected to cost almost £2,000 per UK citizen by next year and costs will rise further in the future as an aging population means less and less working people will support more pensioners over time.

“The DWP March forecast expected the total state pension cost to rise to £135 billion in the tax year beginning April 2024. But a bumper wage bill for employers has a knock-on impact on the state pension bill which could rise to a total cost of around £138 billion next year. The cost of the triple lock could hit over £10 billion next year, based on ii calculations. The final bill could be lower if inflation or wages fall during July.”

Great news for pensioners

Guy adds: “The rising state pension is great news for pensioners, especially the millions that have no other income apart from the state pension. Pensioners on low incomes have been particularly hard hit by the cost-of-living crisis and it will be a welcome relief to receive an extra boost next April.”

“Despite recent increases, the UK state pension really only provides a basic income in retirement and those who want to have more than a basic standard of living will need to save separately in a workplace or private pension.”