MILLIONS of people are set for a bumper rise of £901 to their state pension next year.
It comes after figures published today revealed wages are continuing to rise at their fastest rate on record.
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These figures have led most experts to believe that wages will be the determining factor of how much pensions will increase by next April.
That’s because the triple lock system sees the state pension rise in line with whatever is highest out of: wages for May to July, 2.5% or September’s inflation figures.
Growth in employees’ average total pay was 8.5% in the three months to July, putting it above the current rate of inflation at 6.8%.
It means, if inflation stays around where it is, pensioners on the new state pension could be looking at an extra £901 a year.
This is up from £10,600 to £11,501, and a weekly rise from £203.85 to £221.17.
It’s important to note though that this is for those entitled to a “full” state pension, how much individuals get is based on the number of qualifying years you’ve accrued.
Older pensioners who retired before April 2016 will get a weekly rise from £156.20 to £169.47, and an annual rise from £8,122 to £8,812.
Inflation currently sits at 6.8% but we won’t know the September figure until October when it’s announced for the previous month.
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Although, rising fuel prices in August are likely to lead to a blip in the latest inflation numbers, according to both Chancellor Jeremy Hunt and Bank of England governor Andrew Bailey.
Even if inflation increases slightly though or stays at its current rate, today’s wages data looks to be the deciding triple lock factor.
Fresh inflation figures will be announced next week for August, which will give further indication of how much it could fall or rise by come September.
Experts at AJ Bell have said that earnings growth will “almost certainly” be the deciding factor, “barring a major inflationary shock”.
Tom Selby, head of retirement policy at AJ Bell, said: “Retirees are set to receive their second blockbuster state pension increase in a row as a result of the government’s ‘triple-lock’ policy.
“With price rises seemingly on a steady downward trajectory, it is almost certain – barring a major inflationary shock – that today’s 8.5% earnings growth figure will be used for next year’s state pension rise.”
Interactive Investor’s calculations suggest that pension payments will go up by 8.5% to £11,501 in April.
Alice Guy, head of pensions and savings, at II said: “The triple lock increase is great news for millions of pensioners, providing a lifeline to many poorer households.
“One in eight pensioners don’t have any income in addition to the state pension and are completely dependent on the triple lock to help them cover their rising costs.”
She added that women in particular are likely to rely just on the state pension, especially if they are on their own.
Meanwhile, Helen Morrissey, head of retirement analysis at Hargreaves Lansdown pointed out that if the increase does go ahead as expected, it could be a “headache” for the government.
She said: “Such an increase will be welcomed by pensioners, who have gone through difficult times this year as the cost of living continues to lay waste to our finances.
“However, it will continue to be a headache for government who need to battle the ever spiralling cost of the state pension bill.
“The Prime Minister recently refused to be drawn as to whether he would support the triple lock long term though as a general election draws ever closer it would be a difficult pledge to step back from.”
Meanwhile, Steve Webb, former pensions minister and partner at LCP, has warned that over half a million more pensioners will be dragged into “an income tax net” if pensions go up by 8.5%.
That’s because with the personal tax threshold due to be frozen again at £12,570 next year, a large pension rise on top of last year’s 10.1% rise, will drag many more pensioners into the next threshold.
He said: “Today’s figures for earnings growth are likely to mean a second successive significant cash increase in the value of the state pension, following on from this year’s 10.1% increase.
“Alongside a continued freeze of the tax-free personal allowance, this is likely to drag well over half a million more pensioners into the income tax net.
“Once again, ‘stealth’ taxation proves a convenient revenue raiser for the Chancellor.”
Steve also expects that the idea that the government could break the triple lock is “quite inconceivable” prior to a potential general election in 2024, as it has already done this once in the last three years due to the pandemic.
However, ministers are said to considering whether to strip out the impact of public sector bonuses on the wages figure to reduce how much pensions are increased by.
This could mean an increase of around 7.8% instead, potentially saving the government hundreds of millions.
The predicted rise would also push up pension credit amounts for the most hard-up pensioners.
Those struggling right now with their bills can get access to extra help though.
The government is offering out three cost of living payments worth £900, between £150 to £300, and £150.
The first instalment of the main £900 payment was made earlier this year.
The second and third instalments are set to be paid in autumn this year and spring 2024.
Meanwhile, millions of pensioners will receive a £150-£300 top up to their Winter Fuel payment.
And the £150 payment has been paid to millions with disabilities.
How much is the state pension?
State pension payments were increased in April this year.
The full rate of the new state pension rose from £185.15 a week to £203.85 – in line with last September’s 10.1% inflation rate.
This equates to £10,608 in total over a year.
This is what the state pays those who reach state pension age after April 6, 2016.
The amount of new state pension you receive depends on your National Insurance (NI) record throughout your adult life.
If you have made at least 35 years of qualifying NI contributions, you may qualify for the maximum amount, outlined above.
The same is true if you have received equivalent credits on your NI record for raising children or providing care.
If you don’t have 35 years, you may be able to top up your record by paying in voluntary NI contributions.
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