Under the ‘triple lock’ guarantee from next year, the single state pension will increase from £221.20 per week – the equivalent of £11,502 per year – to £230.30 per week or £11,975 per year.
This is for those who reached the state pension age after April 2016.
The triple lock means the increase in the state pension is the higher of national average earnings, inflation – as per the Consumer Prices Index (CPI) – or 2.5%.
This formula is applied to the old basic state pension and the new state pension post-April 2016, and not to any other state or workplace pension.
For those who reached the state pension age before April 2016, their basic state pension will increase from £169.50 per week – the equivalent of £8,814 per year – to £176.45 per week or £9,175 per year.
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The final amounts for next year will be decided by the Work and Pensions Secretary around the time of the Budget, and may be slightly different from forecast at this point.
The increase follows the release of the latest economic data, including inflation figures.
The inflation figure was 1.7% in September, lower than expected, while the average earnings growth in the three months to July is 4.1%, up from its previous estimate of 4%.
This has nudged the expected state pension increase higher than previously expected.
It means that the single state pension is set to exceed the personal allowance of £12,570 by 2027-28, even if the benefit increases by only 2.5% per year – the lowest possible element of the triple lock guarantee.
As a result, experts suggest that at some point during this Parliament, the new Government will need to address the question of what the state pension should be worth and when people should receive it.
A ‘sizeable increase’ in the state pension
Rachel Vahey, head of public policy at AJ Bell, said: “Pensioners should from next April see a sizeable increase to their state pension of almost £500 a year, to bring it to just under £12,000.
“The Chancellor, Rachel Reeves, may choose to shout out about this inflation-beating boost in her first Autumn Statement in two weeks’ time.
“Criticism of the decision to scrap the Winter Fuel Payment for all pensioners except those that claim Pension Credit still lingers, and the Government will hope this rise in the state pensions will publicly reinforce its commitment to the triple lock, as well as overshadowing the £200 most pensioners will lose this winter.
“But how long they can keep these promises remains to be seen.”
She added: “The state pension is now at a level perilously close to the frozen personal allowance and should overtake it in two years’ time.
“At that point, something must surely give. But slowing the increase in state pension growth or unfreezing the personal allowance both seem unlikely.
“It could be that this fast-approaching crunch time means the Government will finally be forced to address the question of how much the state pension should really offer, at what age, and how it can increase payments sustainably each year.”
Changes to state pension age
More than 12 million people currently receive the state pension.
Those born between 6 October 1954 and 5 April 1960 start receiving their pension at the age of 66.
However, for those born after this date, the state pension is increasing, with a gradual rise to 67 for those born on or after 5 April 1960.
There is a gradual rise to 68 between 2044 and 2046 for those born on or after 5 April 1977.
The state pension cost £110.5bn in 2022-23, which is just under half the total amount the Government spends on benefits.
The Office for Budget Responsibility (OBR) expects this to grow to £124bn for 2023-24.
