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 In a recent hastily withdrawn report, the Government Actuary’s Department said that the triple lock has already added £6bn a year to the welfare bill, compared with the cost of a simple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.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.