Published On: Mon, Mar 4th, 2024

DWP state pension payments to hit £13,200 a year – but triple lock under fire | Personal Finance | Finance

could soon be taking home over £13,200 a year but the may have to change to keep the policy affordable.

If the triple lock remains in place for the rest of the decade, by the time of the 2029/2030 tax year, the full new state pension could rise to £13,236.10 a year, or around £254.54 a week.

This is according to figures from wealth firm AJ Bell, with the group warning the policy for increasing the state pension each year is currently “aimless” and the rules may soon need to change.

Tom Selby, director of public policy at AJ Bell, said: “While the policy is understandably popular, it remains entirely aimless, with neither major party clearly stating how much they believe the state pension should be worth.

“As the real value of the state pension rises as a result of the triple-lock, it also increases the likelihood of planned state pension age hikes being accelerated to balance the books, creating both uncertainty and the potential for intergenerational unfairness.”

The group calculated how much the full new state pension could increase based on Bank of England predictions for inflation and earnings growth, if the triple lock is retained:

2024/2025 – £11,502

2025/2026 – £11,962.08 – four percent (based on earnings)

2026/2027 – £12,291.04 – 2.75 percent (based on earnings)

2028/2029 – £12,913.27 – 2.5 percent (based on lowest limit)

2029/2030 – £13,236.10 – 2.5 percent (based on lowest limit).

This also means the full new state pension would cross the current threshold for paying income tax, at £12,570 a year, by 2028/2029.

Mr Selby called on ministers to set out a clear plan to keep the state pension for keeping payments at a fair rate.

He said this could be done by linking payments to a proportion of average earnings or basing them on the length of time claimants receive the funds on average.

He added: “There should also be a review of exactly how state pension increases are applied in light of the dramatic fluctuations in both inflation and earnings we have seen since the pandemic.

“A smoothed inflation and earnings figure could make future rises much more predictable. For this necessary reform to happen, politicians will need to show bravery and step beyond the current ‘Will they? Won’t they?’ debate over the triple-lock.

“The state pension remains the bedrock upon which people’s retirement plans are built, so embedding at least some certainty into the system is crucial to help Brits plan with confidence.

“Given how politically charged debates over the state pension can be, an independent commission will likely be necessary to build cross-party support and deliver reforms that stand the test of time.”

For the latest personal finance news, follow us on Twitter at @ExpressMoney_.

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