The Government has broken its triple lock promise, denying millions of pensioners a record £822 increase next year – but it still has to honour September’s inflation figure
The state pension could rise by more than £300 next April if inflation continues to rocket past 3%.
While the Prime Minister has called off an 8.8% increase by suspending the triple lock, retirees will still see their incomes rise by the highest out of inflation or 2.5% – whichever is highest, next year.
Latest figures show the cost of living rose 3.2% in August which would add an extra £5.75 a week to payments of the new state pension.
The government typically uses the September inflation figure to determine how much the state pension must rise by each year – a rate that will be revealed in October.
Experts have predicted that inflation in October will be 3%, but August’s rise indicates that it could be higher, pushing state pension payments past a £300 a year boost.
The Bank of England predicts inflation could even reach 4% by the end of the year.
The pension will always rise by a minimum of 2.5% under the triple lock, even as it’s paused, but if inflation is higher it will rise by that amount instead.
Kate Smith, head of pensions, at Aegon said: “Today’s figures come one month ahead of the all-important inflation figure for September, which will confirm how much the state pension increases by in April.
“With inflation rising steeply in August and expected to continue on this path to the end of the year, state pensioners could see a substantive increase in payments in April, even with the earnings element of the triple lock stripped out.”
The current new state pension is £179.60 a week, or around £9,339 a year.
A rise of 3.2% would add an extra £5.75 a week to the payment, increasing it to £185.35 a week.
Over the year that’s £9,638, and an extra £299.
Men born on or after April 6, 1951, and women born on or after April 6, 1953, will be able to claim the new state pension.
To get the state pension you need a minimum of 10 “qualifying” years in work and 35 years’ worth of National Insurance contributions to get the maximum amount.
Those who reached the state pension age before April 6, 2016, get the old state pension, known as the basic state pension which is currently £137.60, or £7,155.20 a year.
A rise of 3.2% would add an extra £4.40 a week to the payment, increasing it to £142.
Over the year that’s £7,384 and an extra £228.80.
If you’re on the state pension, you may be able to get boost worth hundreds of pounds a year in the form of Pension Credits.