State pension to hit £11,000 next year but triple lock ‘long-term viability’ in question
The triple lock guarantees state pensions rise every year but experts are warning that future increases may not be implemented.
BBC Money Box experts explain increases to State Pension
State pensions are likely to “rise above” £11,000 a year in 2024 but future rate increases may not be possible, according to experts.
Pensioners are guaranteed a payment rise annually thanks to the Government’s triple lock pledge.
However, retirement analysts are questioning the “long-term viability” of this promise due to the cost at the taxpayers’ expense.
Under the triple lock, state pension payments rise by either the rate of inflation, average earnings or 2.5 percent; whichever is the highest.
As it stands, most experts believe that the Consumer Price Index (CPI) inflation will be used as the metric to determine the payment hike.
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Last month, the CPI rate eased to 7.9 percent which many analysts believe is a sign that the country’s economy is improving.
However, this remains significantly higher than the Bank of England’s desired target for inflation.
Furthermore, if this rate was applied to state pensions under the triple lock, older Britons would be set for yet another significant annual payment rise.
Experts are warning that the taxpayer may not be able to afford similar triple lock-guaranteed rate hikes in years to come.
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David Pye, the director at independent consultancy Broadstone, broke down what could potentially be at stake for retirees.
He explained: “After benefitting from around a £1,000 increase to the State Pension this year, retirees look set for another multi-hundred-pound boost as high inflation persists.
“It looks likely that the state pension will rise above £11,000 next year which will further embed its importance as the foundation of pensioners’ income.
“At this current rate of increase, it won’t be long before retirees start tripping over the £12,500 income tax threshold solely based on the state pension.
The finance expert sounded that alarm over the “demographic bomb” which is due to impact peoples’ pensions in the near future.
Mr Pye added: “However, with government finances under pressure, the soaring cost of the state Pension triple-lock will raise further questions around its long-term viability.
“A demographic bomb is soon to hit with a significant number of baby boomers approaching retirement which will ratchet up the state pension’s cost to the taxpayer’s public purse.”
When inflation is used as the metric for the state pension triple lock guarantee, the CPI rate for September is often used.
