The UK government has once more fulfilled their triple lock promise. Elucidating, the triple lock is essentially a pledge from the government to boost the State Pension by a predetermined amount. This increase hinges on the highest of three significant factors.
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Key Components of the Triple Lock System
The first component is average earnings or wage growth, observed from May to July of the year proceeding to the rise. For 2023, this was 8.5%. The second factor is inflation, generally gauged by a basket of goods and measured in September 2023, which stands at 6.7%. The last parameter is a fixed increase of 2.5%, applied if neither inflation nor wage growth reaches this target. Consequently, a minimum of 2.5% increase is guaranteed, but in this case, wage growth being the highest, State Pension will rise by 8.5%
Future Increases and Who Qualifies
The increment will be applied in April 2024 and should be automated, requiring no action from the pensioners. However, it is advisable to monitor your pension payments, to ensure the increase is received. In case of discrepancies, you’d need to reach out to the government. Unfortunately, for expats or those living overseas, State Pension will not be raised. Although the reasoning behind this rule is unclear, the pension amount froze on your departure day from the UK. This amount will remain static unless you return to UK.
Facts about Pension Credits and Other Benefits
This hike applies evenly if you are entitled to an old basic state pension or the newer, full State Pension. The National Insurance credits you have gathered by working each year influence both the systems. If you have not worked due to a government-considered valid reason, you may be eligible for pension credits. It’s essential to evaluate the worth before purchasing extra qualifying years.
If you are already drawing your pension and it hasn’t reached full entitlement, expect approximately an 8.5% boost on your existing payment. To provide concrete numbers, if you’re receiving the old basic state pension, it will increase from £156 weekly to £169 per week starting from April 2024, totaling roughly £8,814 annually. The new full state pension is expected to rise from £23 per week to around £221 weekly, roughly £11,152 annually.
Given the government’s decision to freeze tax thresholds, vigilant monitoring is needed to avoid being taxed on your state pension. Furthermore, the disparity between the old and new Full State Pension is expanding. But additional assistance may be available if you are on the old basic state pension. A pension credit or a guaranteed credit is applied to your pension to meet the government set minimum if your pension fall short of the minimum threshold. Hyperlinks would be helpful if the readers want to learn about this in more detail.
