Jeremy Hunt has confirmed that the government will "honour our commitment to the Triple Lock in full", meaning an 8.5% increase to the State Pension next year.
During the Autumn Statement, Hunt confirmed that the State Pension will increase by 8.5%, or £221.10 a week, meaning pensioners will receive around £900 more a year.
Hunt said the rise is "one of the largest ever cash increases to the State Pension".
Simon Kew, head of market engagement at Broadstone, said: “For the past few months, pensioners have been on tenterhooks waiting for the Chancellor to announce his decision on the triple lock uprating for next year’s State Pension.
“Today’s confirmation in the Autumn Statement that the State Pension will increase by 8.5% will be music to their ears.
“The Chancellor has stuck to the government’s manifesto pledge and avoided the temptation of sneakily cutting the uplift to 7.8% by excluding bonuses from the wage growth figure. It means that the State Pension will rise to around £11,500 from £10,600 boosting pensioner income at a time when cost of living pressures are still squeezing household budgets.
“A second successive bumper boost to the State Pension will raise further questions around its long-term affordability, especially given the somewhat precarious state of the nation’s finances.”
Dean Butler, managing firector for retail direct at Standard Life, commented: “There will be no fiddling with the triple lock formula this year as the Chancellor confirmed his intention to offer those in receipt of the state pension the full 8.5% due as a result of increases to average earnings. There had been some speculation that we may see a reduced offer of 7.8% to reflect the fact that some of the earnings growth was due to a one off payment to public sector workers.
“The last couple of years have seen exceptionally large increases applied to the triple lock as a result of inflation and wage growth and questions surrounding the growing cost remain. A proposed review of the state pension was pushed out earlier this year reflecting the highly sensitive nature of the policy this side of an election.”
Sian Steele, head of tax at Evelyn Partners, added: “This will be very welcome to those receiving, or about to receive, the state pension at a time of rising living costs.
“With an election on the horizon, the political consequences of tinkering with the triple lock might have figured in the Chancellor’s calculations. Whether the state pension can be increased in the same way over the long term alongside an ageing population is another question.
“With the inclusion of bonuses in the earnings element of the triple lock, many in the Treasury are probably lamenting a missed opportunity to save the public purse some extra outlay.
“The 8.5% hike now nailed on for April means the state pension will cost the Treasury £2 billion more in 2024/25 than the Office for Budget Responsibility forecast at the Spring Budget and that comes hot on the heels of this April’s bumper 10.1% state pension hike, which added £11 billion to Government spending in 2023–24.
“Adjusting down the prescribed rise for April to 7.8% - the rate of earnings growth excluding bonuses - would inevitably have attracted criticism, and might not have saved a huge amount for the public purse. But it would arguably have been quite a sensible alteration.
“The surprise is more that successive governments have allowed bonuses to be included in the calculation, as they are volatile and something that only a small proportion of the working population benefit from – and this year’s figure was particularly distorted by a one-off NHS deal. It’s also not clear why the inflation and earnings growth elements of the triple lock are taken from one month and three months respectively, rather than longer periods that would give a more stable and accurate picture.
“Outside of an election year, this could be a relatively uncontroversial reform to the triple lock, as it’s clear that demographic and life-expectancy trends will escalate costs to the Treasury from the state pension over the coming years.
“From a tax point of view, this increase for the state pension takes it a step closer to the frozen annual personal income tax allowance, which means that a retiree will not need a great deal of private income in retirement – whether that is from a personal pension, investments or property – before they pay tax at the basic rate of 20%.
“The new flat rate annual state pension of £11,501 in the 2024/25 tax year, is just £1,069 short of the £12,570 tax-exempt allowance as it stands in 2023/24.”
