The basic state pension will rise by nearly 3% next April.
The Autumn Statement confirmed that the basic state pension will rise by £3.35 a week to £119.30 a week from next April. The increase of 2.9% is the result of the ‘triple lock’, which requires the basic state pension to increase each April by the greater of inflation (as measured by the Consumer Prices Index – CPI), earnings growth and 2.5%. However, other existing state pensions (such as the State Second Pension) will be unchanged next year because their increases are linked to the CPI, which fell by 0.1% in the year to September.
The Chancellor also announced the rate for the new single tier pension, which will apply if you reach state pension age after 5 April 2016. At £155.65 a week, it is slightly higher than had been expected and 2.9% above the notional figure for 2015/16. The new pension will also be subject to the ‘triple lock’, although how long that will continue is a moot point. In a recent hastily withdrawn report, the Government Actuary’s Department said that the triple lock has already added £6bn a year to the welfare bill, compared with the cost of a simple earnings link.
To put the newly increased single tier state pension into context, from next April it will represent less than two thirds of what somebody working a 35-hour week on the new National Living Wage will earn. No wonder the government remains anxious to encourage private pension provision.