State pension could rise by 4% next year – giving elderly £351 extra a year
THE state pension could rise by 4 per cent next April, giving retirees a cash boost of hundreds of pounds a year.
Anyone receiving a full state pension will be £351 better off a year, as payments would increase from £168.60 per week to £175.35.
If you reached state pension age before April 6 in 2016, you’ll be receiving the old state pension, which means your payments would rise from £129.20 to £134.35 per week – or an extra £267.28 per year, insurer Aegon says.
The state pension is currently protected by the so-called triple lock, which ensures it rises by at least the same rate as the cost of living.
It means that the state pension increases either by 2.5 per cent a year, the rate of inflation or average salary growth, whichever is highest.
Inflation stood at 1.7 per cent in August, although the September figure used won’t be announced until mid-October.
While the earnings growth figure used is for the year to July, and it came in at 4 per cent.
So unless there are any last-minute changes, pensioners will receive a 4 per cent increase from April, Aegon said.
Steven Cameron, pensions director at Aegon said: “Based on the latest earnings growth figures, it looks like state pensioners can look forward to an inflation busting 4 per cent increase in their state pension from next April.
“This will be welcome news for current state pensioners. However, these inflation busting increases do come at a significant cost.
“The state pension is not funded in advance so pensions are funded on a ‘pay as you go’ basis from today’s workers’ National Insurance contributions.
“With the prospect of an early general election, it will be interesting to see where each party stands on commitments to retaining the triple lock for the next five years.”
The triple lock was first announced in 2010 and since then the old state pension has risen from £97.65 in April 2010 to £129.29 for a single person – an increase of 32 per cent.
In comparison, prices have gone up by 24 per cent while earnings have risen by 20 per cent on average.
There are concerns about the sustainability of the pension triple lock, which is guaranteed until 2022 but could be scrapped after that.
Figures from Office for Budget Responsibility show that without the triple lock the state pension bill will increase by £21billion over the next 40 years, but with it the cost will soar by £35billion.
Top tips to boost your pension pot
DON'T know where to start? Here are some tips from Aviva on how to get going.
- Understand where you start: Before you consider your plans for tomorrow, you’ll need to understand where you stand today. Look into your current pension savings and policy and research when you’ll be eligible for the state pension, and how much support you’ll receive.
- Take advantage of your workplace pension: All employers are legally required to provide a workplace pension. If you save, your employer must contribute too.
- Track down your pensions: If you’ve moved jobs a lot, this means you’ll have several pension pots. It can be hard to keep track of them all, but the government offers to help you.
- Take advantage of online planning tools: and have tools that give you an idea of what your retirement income will be based on how much you’re saving.
- Find out if your workplace offers advice: Many employers offer sessions with financial advisers to help you plan for your future retirement.
Earlier this month, it was revealed that retirees are turning their pension pots into cash at a record pace – but it’s dragging down savings rates for everyone.
The state pension age should rise to 75 from 68, a report suggested last month – raising fears some workers will NEVER retire.
If it does, retirees will need to save an extra £84,000 in order to avoid poverty.
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