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State pension likely to rise by £488 a year in April
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Published
The state pension is expected to top £13,000 next April putting pressure on public finances and reigniting the debate around generational fairness.
It is expected to rise by £488 to £13,036.40 a year, based on the latest official earnings figure released on Tuesday.
The so-called triple lock pension policy guarantees that annual payments will increase by either average wage growth, inflation or 2.5% – whichever is highest.
Labour made a manifesto pledge to keep the triple lock, however economists have warned about the cost of the policy and it will mean tough spending choices in next month’s Budget.
The policy is “crazy,” Ruth Curtice, the chief executive of the Resolution Foundation think tank, told the BBC.
The triple lock is creating a “ratchet effect” where “pensioners’ living standards grow even faster than just a typical worker,” she added.
The policy was introduced under the Conservative-Liberal Democrat coalition government.
Curtice told the BBC’s Today programme: “It’s not affordable in any situation to simply have pensions rising faster than earnings because earnings are a big part of the tax base.
“Pensioners have seen living standards grow three times more than typical workers over the last 20 years.”
Average wage growth, including bonuses, eased to 3.9% between May and July, according to the Office for National Statistics. However, it remains above inflation at 2.9%.
Tax returns?
Almost 13 million people receive the state pension in the UK. If it does rise by 3.9%, it would take the flat-rate state pension above the personal allowance of £12,570 and therefore be liable for income tax.
The Labour government has previously promised that pensioners who rely solely on the state pension would not be required to complete a tax return, nor be chased to pay.
The increase to next year’s state pension will not be confirmed until September inflation is released next month. Inflation is currently 2.9% and not expected to be higher than the wages figure.
This means:
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the flat-rate state pension – for those who reached state pension age after April 2016 – will likely be £250.70 a week, or £13,036.40 a year. That would be an increase of £488
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the old basic state pension – for those who reached state pension age before April 2016 – will likely be £192.10 a week, or £9,989.20 a year, an increase of £374.40
Liam McLaughlin, an associate economist at the National Institute of Economic and Social Research (Niesr) think tank, said the increase in the state pension added “fiscal pressure at a time when the triple lock is already under scrutiny”.
The ONS also published figures on the UK labour force. While the unemployment rate was unchanged at 4.9%, the number of vacancies and employees on payrolls fell in recent months.
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