The UK government is considering giving a big boost to the state pension next year. This means that if you’re receiving a state pension or will in the future, you could see more money in your pocket. They’re thinking of an 8.2% increase, making it close to £11,500 a year, or about £220 a week.
Why is This Happening? There’s a rule, called the “triple lock,” which says that every year, the state pension must go up by one of three things:
- How much prices are increasing (inflation).
- How much the average earnings are growing.
- A minimum of 2.5%.
Right now, the average earnings are growing quite a lot, at 8.2%. This is probably because many people have gone back to work, and some have received bonuses, like NHS staff. Because of the triple lock rule, this means that the state pension might have to increase by this much.
How Do Older People Benefit? A lot of older people are finding that their bills are getting bigger and bigger. A rise in the state pension would help them out. On top of that, many older people don’t have a mortgage to pay anymore, so they don’t have to worry about high interest rates. Plus, if they’ve saved money in the bank, they might be getting more interest on their savings now.
What are the Experts Saying?
- Steve Webb, a former Pensions Minister, says that the government might have to pay an extra £2 billion than they thought because of this rise in the state pension – “Today’s new figures on average earnings growth suggest that next year’s state pension rise could easily be 2 per cent higher than expected by the Chancellor at the time of the Budget.” But, with an election coming up in 2024, the government probably won’t change the triple lock rule because it would upset a lot of voters.
- Steven Cameron, a pension expert, thinks that pensioners could be the big winners here. They won’t be affected by rising mortgage costs and might get more interest from their savings.
- Helen Morrissey, another expert, says that the increase in the state pension might not be as big as last year’s, but could still be around 7%. This is good for pensioners, but not so good for the government who has to find the money.
- Adrian Lowery is a bit worried. He thinks the cost of the state pension is going to be really high. In fact, he says it could be more than what the government spends on schools, the police, and the military combined in the next couple of years.
- Jon Greer thinks that even though the state pension is costing a lot, the government won’t change the triple lock rule, especially with the election coming up. But, he thinks that in the future, they might have to find a different way to decide how much the state pension goes up by.
Bottom Line: The state pension might be going up by quite a bit next year because of the triple lock rule. This is great for older people, especially with rising costs. However, some experts are worried about where the government will find the money to pay for this. Also, with an election coming up in 2024, it’s unlikely the government will make big changes to the rule. But, they might need to think about it in the future.