State pension increase 2023 to 2024: is state pension going up?

In his 2022 autumn statement, Chancellor, Jeremy Hunt, confirmed that the restored triple lock would remain in place. As a result, the state pension and certain other benefits, including Universal Credit, will be increased by 10.1% – in accordance with September’s Consumer Prices Index (CPI) measurement of inflation.

To learn more about the details, please continue reading this Moneyfarm blog.

How much will the UK state pension increase in 2024

The state pension increase 2023 to 2024 of 10.1% will come into effect at the start of the next tax year, from the 6^th of April 2023. Before Jeremey Hunt confirmed this in the Chancellor’s August statement, there was speculation that the triple lock, which had been cancelled for the 2022/2023 tax year by the UK government, would remain cancelled in 2023/2024. We now know that not to be the case. The latest information is that the state pension rise of 10.1% will happen.

What will the UK state pension be in 2024?

In this section, we will look at what the pension rise in the 2023/2024 tax year means in terms of cash.

The current basic full state pension is £141.85 per week. A pension rise of 10.1% on this, cash-wise, translates to an increase of £14.33 per week, taking the new weekly payment to £156.18. Those eligible for basic state pensions are men born on or after the 6^th of April 1951 and women born on or after the 6^th of April 1953.

The current, full new state pension, provided you have made the necessary NI contributions, is £185.15 per week. A pay rise of 10.1% cash-wise translates to a pension pay rise of £18.70 per week, sending the new weekly payment to £203.85. Those eligible for the new state pension are men born on or after the 6^th of April 1951 and women born on or after the 6^th of April 1953.

You could receive less on the basic and the new pensions if you haven’t paid sufficient NI contributions. Conversely, you could receive more if you’ve overpaid on NI subscriptions or through deferring state pension.

The cost-of-living crisis in the UK

The cost-of-living crisis began over a year ago, as reported in the article  “Seven reasons the cost of living is going up around the world” on BBC News.

Government support during and coming out of the COVID-19 pandemic, rising energy costs which were considerably worsened by the Russian invasion of Ukraine, rising transportation costs, food shortages, etc., have all contributed to the cost-of-living crisis most of us face here in the UK today.

An article on the Moneyfarm website entitled “How the UK is responding to the cost-of-living crisis” explains what the UK government is doing and has done to abate the growing crisis. The state pension change that is due to come in for 2023 to 2024 will help, but when does the state pension increase? Not until the 6^th of April, 2023. In the meantime, pensioners will have to get by the best they can, like everyone else.

Pension rates in 2024 and the triple lock

The pension triple lock is a mechanism the Conservative/Liberal government introduced in 2010. Its purpose is to increase state pensions according to the highest of three measures, which are:

• In line with inflation – according to the Consumer Price Index (CPI).
• The UK average increase in pay across the UK.
• 5%

It was suspended during the COVID-19 outbreak, and as a result, UK state pension increase in 2022 (the tax year 2021- 2022) was 3.1% as per the CPI.

It is only state pensions that are affected by the triple lock. Personal, workplace pensions and SIPPs each have their own pension pots, which rely on the performance of their underlying investments. So, whereas the answer to the question “is state pension going up next year” is yes, by 10.1%, the answer to “are the rates on other pension options going up next year” is unknown.

If, as part of your investment strategy, you have a personal pension or SIPP, it will be your responsibility or a fund manager’s responsibility to manage the underlying investments depending on the exact nature of the fund. But you must always bear in mind that the values of investments can rise and fall.

How much will the UK State Pension be in 2025?

It is hoped that the cost-of-living crisis the UK is currently facing will have receded somewhat by the time we get to the year 2025.

According to a graph in an article entitled “Rising cost of living in the UK” on the House of Commons Library, the BOE is forecasting inflation to be down around 1.8% by the end of 2025 and down further to about 1% and trending lower by the middle of 2025.

What will the State Pension be in 2026?

Of course, looking as far ahead as 2025 can only be speculative. But even more so, are state pensions going up in 2026?

By the time 2026 rolls around, the state pension age change will be due to get underway. At that moment, if you have reached the state pension age of 66, you still get your state pension. This is because, between 2026 and 2028, the state pension age will increase from 66 to 67

Although we can guess what the state pension rise will be in three years, it is unlikely to provide you with the lifestyle you would want – perhaps not even if you add workplace pension income to it. But, if you know how to invest money and get your financial planning right, you could be comfortable once you reach retirement age.

Will there be a State Pension in 2040?

There is some concern about the future of the state pension. The UK’s ageing population and the continually increasing old-age dependency ratio (OADR) are raising concerns. The OADR is a ratio of the number of people of pensionable age and over (per thousand), measured against the number of people aged sixteen to state pension age.

According to the Office of National Statistics graph, in 2023, we are talking about 292.37 per 1,000 (or 29.23%) and 386.10 per 1,000 (or 38.61%) in 2040 and climbing.

The “Ageing Confidently” report published by the CSJ (Centre for Social Justice) argues that while the government is expecting the state pension age to rise to 68 between 2044 to 2046, the CSJ think tank recommends increasing the pension age increase to 70 by 2028, and 74 by 2035. This increase is to ensure that the OADR stays in the 20% to 25% range over the next 20 years.

Reviewing your retirement savings in your 50s

Regardless of state pension rise and age pension rise in the coming years, reviewing your 50s retirement savings position and investment plans is recommended. Also, bear in mind that the longer you work, the more likely you are to change employers and accumulate more than one workplace pension. Therefore, consider a pension transfer to ensure that your investments are working for you as hard as possible.

Understanding that the value of investments can fall as well as rise must be fundamental to any financial strategy. Diversifying your savings portfolio minimises any potential losses.

The importance of pensions for the self-employed

If you are self-employed, it’s important you keep up with your NI contributions to ensure you are entitled to the UK state pension and any state pension increases that the DWP agrees to. You should also contribute to a self-employment pension in the hopes that the investments will perform well in order to boost your retirement income. State pension income on its own is not likely to cut it, no matter how the future state pension rises.

FAQ

What is the UK state pension increase for 2023/24?

In 2023/24, the basic state pension increased from £141.85 to £156.20 per week. The full new state pension increased from £185.15 to £203.85 weekly. The maximum additional pension (personal and inherited) increased from £185.90 to £204.68 per week. The increment for new state pension (based on deferred and old state pension), basic pension, and additional pension was from 3.10% to 10.10%.

When am I eligible to claim the new state pension?

Men born on or after April 6, 1951, and women born on or after April 6, 1953, are eligible to claim the new state pension. In addition, people who reached the state pension age before April 6, 2016, will receive the basic state pension.

Which measure was used to increase the state pension in 2023/24?

The UK government used the Consumer Price Index (CPI) rate of inflation to determine the rise in the state pension for 2023/24.