February 27, 2023
The UK State Pension will increase from April 2023. The triple lock, introduced in 2010, was designed to make sure that the State Pension doesn’t lose value over time, and aims to protect pensioners against the impact of inflation.
Inflation causes the price of goods and services to increase over time, so if the State Pension didn’t change in line with that increase, it would be worth less to you, as you would be losing money in real terms.
As the name triple lock suggests, it includes three separate measures of inflation. This three-way guarantee was that, each year, the State Pension would increase by the greatest of three measures:
The government usually compares the three rates in September, before implementing the correct rise the following April.
The State Pension triple lock has caused trouble successive governments, and has been costly for the taxpayer. In particular, because of an unusually large increase in average earnings at the end of the government’s furlough scheme, the triple lock was suspended during the Covid-19 pandemic.
People generally earned much less during the lockdowns of 2020, so when they started returning to work in 2021, there was an unusually big leap in average earnings of 8% This meant that, instead of using average earnings as a measure, the CPI measure of inflations (then 3.1%) was used. The government also announced that the triple lock would be suspended for the 2022/23 tax year.
So, anyone receiving the State Pension has probably been anxiously watching the speculation that the government would break the triple lock in order to save money, but the good news is that, in the 2022 Autumn Statement, Chancellor Jeremy Hunt confirmed that the government will reinstate it from 6 April 2023.
This means the State Pension will rise in line with last September’s inflation rate – 10.1% – in the 2023/24 tax year. Anyone receiving the State Pension will benefit from this rise.
If you’re currently receiving the UK State Pension, this means that your pension will go up – good news, especially with the current rise in the cost of living.
From April 2023 payments will be:
£203.85 a week (currently £185.15) for the full, new flat-rate state pension (for those who reached state pension age after April 2016)
£156.20 a week (currently £141.85) for the full, old basic state pension (for those who reached state pension age before April 2016)
Whether you’re already entitled to claim your State Pension, or you’re not quite there yet, we believe it’s never too early (or too late) to be planning ahead.
At Talis IFA we will review your current finances and retirement plans and help you to make your money work for you. We take a ‘life first, money second’ approach, so our recommendations are based on developing a deep understanding of your current situation and future plans – whether that’s saving for the future, freeing up money to live your retirement dream or helping out your family. We’ll advise you how to make the most of the tax allowances you’re entitled to, and check that your current arrangements are working as hard as they can.
To find out more, please get in touch.
site by motley.co.uk