Back in August 2021, we looked at the unexpected consequences of then-chancellor Rishi Sunak’s Job Retention Scheme. You might have read Could the triple lock mean you’re in line for a State Pension windfall?
Cut to the present and we’re asking the same question again. This time, for different reasons.
With inflation at a record high, will the triple lock be re-introduced under a new chancellor? And if so, could 2023/24 be the year that your State Pension windfall comes to fruition?
Keep reading to find out.
The State Pension could rise in line with record-high inflation in the next tax year
The widespread furloughing of workers during the coronavirus pandemic in 2020/21, led to an anomalous rise in wage growth the following year.
Wage growth is one of the three factors that comprise the State Pension triple lock. It is these figures that determine the annual rise in the State Pension.
Each September, the rise is calculated for the following tax year, based on the higher of:
- Inflation
- Average earnings growth
- 2.5%
The steep rise in the wages element of the triple lock as people returned to work after the pandemic should’ve forced a State Pension rise of 8% or more.
In the end, though, this didn’t happen.
In September 2021, the government reneged on their manifesto promise to keep the State Pension triple lock intact.
It became instead a double lock, and the State Pension increased by 3.1% for the 2022/23 tax year. This rise was based on the Consumer Price Index (CPI) figure for September 2021.
Now, September approaches once more, with inflation at a 40-year high of 9.4%.
It is the CPI, rather than wage growth, which will be causing the new chancellor sleepless nights. Especially since, as the BBC reported in June, Sunak confirmed the party’s commitment to returning to the triple lock this year.
The full new State Pension is currently £9,627 a year
The State Pension is unlikely to be your main source of retirement income. And yet, as a regular, stable, and inflation-proofed payment, it is a firm foundation on which to build your plans.
The new State Pension currently stands at ÂŁ185.15 a week (or ÂŁ9,627 a year).
Based on current inflation figures (9.4%), this could be set to rise to more than £200 a week (or more than £10,500 a year). If the Bank of England’s (BoE) forecast of an 11% inflation peak occurs in September, the increase could be even higher.
To receive your full entitlement to the State Pension you’ll need 35 “qualifying years”.
Qualifying years include years in which you were:
- Employed and earning more than ÂŁ183 a week from a single employer
- Self-employed and paying National Insurance contributions
- Claiming Child Benefit for a child under 12
- Receiving Jobseeker’s Allowance or Employment and Support Allowance
- Receiving Carer’s Allowance.
If you have between 10 and 35 qualifying years, your State Pension will be calculated based on full qualifying years.
If you reach State Pension Age with less than 10 qualifying years, you won’t be entitled to any State Pension at all.
You can use the government’s website to check your National Insurance record to see what amount of State Pension you might receive based on current amounts.
Those yet to reach State Pension Age could have a longer wait than planned
If you are already in receipt of the State Pension, September’s inflation figure will be key.
For those born in the early 1970s or later though, your State Pension entitlement is still some way off. Worse still, it could soon be pushed back even further.
The government is in the process of conducting a review of the State Pension Age.
Set to rise to age 68 between 2044 and 2046, the review could bring the age increase forward by seven years. This change would see millions of Brits working for longer and could directly alter the plans of anyone born in the 1970s.
Billed as a response to changing life expectancies and an ageing population, the review isn’t due to conclude until May 2023.
You might, though, find that you want to check in with your retirement plans now.
Get in touch
If you are concerned about your State Pension entitlement, or the effect of the triple lock on the amount you receive next year, we can help.
Our Chartered Financial Planners have decades of experience and expertise to help you. If you have questions on any aspect of your long-term retirement plans, please get in touch and speak to us today.
Please note
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.