The Treasury is anticipating that the new full state pension will increase by more than £400 a year in real terms, surpassing inflation. Internal calculations, obtained by the media, suggest that the state pension will rise in line with average earnings, which will be confirmed next week. This is due to the triple lock policy, which ensures that the state pension increases each April by the highest of three measures: inflation, average wage growth in the UK, or 2.5%.
This news comes amid criticism of the government’s decision to reduce the winter fuel payment for most pensioners. With millions set to lose this payment, their overall income increase is expected to be only £100 or £200.
Next year, the full state pension for men born after 1951 and women born after 1953 is likely to reach around £12,000, following a £900 increase last year. Those who retired before 2016 and may have been eligible for an additional state pension are expected to see at least a £300 annual increase, bringing the basic state pension to £9,000 under the old system.
Pensions Secretary Liz Kendall will make the final decision on the pension increase before the Budget next month. However, Chancellor Rachel Reeves has reaffirmed the government’s commitment to the triple lock until the end of this parliament. This pledge, which affects the £130 billion annual state pension bill, has been made by all major political parties.
The triple lock, introduced by the Conservative-Liberal Democrat coalition government in 2010, was designed to protect the value of the state pension from being eroded by rising living costs or wage increases in the working population.
Despite the government’s emphasis on the above-inflation pension increase, campaigners and opposition parties argue that it does not do enough for the hundreds of thousands of pensioners, particularly in rural areas, who live below the poverty line and will lose their winter payment. Former Pensions Minister Sir Steve Webb has warned that 1.6 million older people living in poverty could be at risk of losing their winter fuel payments.
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