Pensioners are expected to receive a larger state pension increase in 2024 than anticipated due to revised wage growth figures. The Office for National Statistics (ONS) released data indicating an increase in total wage growth, including bonuses, to 4.8% for the quarter ending in July, up from an earlier estimate of 4.7%.
Pension Increase Details
The state pension rises each April based on the highest of three measures: total earnings growth from May to July of the prior year, Consumer Prices Index (CPI) inflation in September of the previous year, or a standard increase of 2.5%. The inflation rates for September will be released next week, but current CPI inflation stands at 3.8% as of August.
Expected Pension Amounts
- The weekly amount for those receiving the full new state pension could increase to £241.30 from £241.05.
- For recipients of the full basic state pension, the weekly payment may rise to £184.90, up from £184.75.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, noted this upward revision indicates slight increases for pensioners beginning next April. However, she cautioned that final pension amounts hinge on the inflation figures, which will further clarify the expected adjustments.
Economic Implications
Rachel Vahey, head of public policy at AJ Bell, highlighted potential implications for the Treasury. If inflation does not exceed 4.8% in the upcoming September reports, the pension increase for the new state pension could be approximately £241.30 per week, translating to around £12,548 annually from April 2026.
- This amount would be significant as it marks a rise above £12,000 for the first time.
- The increase may challenge the current personal allowance, which stands at £12,570.
Vahey suggested that if the state pension surpasses the personal allowance, the government might face pressure to reconsider the personal allowance or the sustainability of the triple lock guarantee. Any adjustments to the personal allowance could impose considerable costs on the Treasury, especially given the current economic constraints.
Conclusion
The forthcoming adjustments to the state pension represent a vital development for pensioners. As inflation figures are submitted next week, the outcomes could significantly impact financial planning for retirees in the coming years.
