The State Pension has been in the news a great deal of late. After a huge 10.1% rise aligned with inflation last year, all eyes are on Westminster as the future of the triple lock is once again hotly debated.

With inflation falling below wage growth for the first time in two years, the State Pension could be set to rise by 8.5% (annual growth on average between May to July 2023).

But, with the chancellor’s Autumn Statement looming, many forecasters predict that the government could opt to exclude bonuses. This would lead to a lower, yet still significant increase, of 7.8%. 

So what does the future hold for the State Pension, and how can you be sure to make the most out of yours?

Keep reading to find out.

The State Pension rises each year to combat the rising cost of living

The full new State Pension payable in 2023/24 is £203.85 a week or £10,600 a year. 

To receive this amount you’ll usually need 35 qualifying years of National Insurance contributions (NICs). If you have less than 10 years’ NICs, you probably won’t receive any State Pension at all. With between 10 and 35 years, meanwhile, you’ll generally receive a proportion of the full entitlement.

The amount you receive also increases each year, in line with the triple lock. This looks to combat the rising cost of living by committing to an annual increase of the higher of:

• 2.5%
• Inflation
• Average wage growth 

The triple lock was abandoned in favour of a double lock during the coronavirus crisis but reinstated in 2023/24, leading to a huge increase thanks to high inflation.

This large rise had led some to brand the triple lock unsustainable, with the Guardian quoting William Hague as calling the measure a “runaway train”.

If Jeremy Hunt announces a tweak to the criteria for wage growth (removing bonuses from the calculation) could it spell the end for the triple lock?

There are ways to make the most of the State Pension now

Check your National Insurance record

While the State Pension won’t be your sole source of retirement income, this isn’t the case for everyone. A recent interactive investor report found that more than a quarter (28%) of over-55s are entirely reliant on the State Pension. 

Either way, ensuring that you receive your full entitlement is vital.

The State Pension can provide a solid bedrock of guaranteed income on which to build your plans. Use the government’s website to check your National Insurance record and see if you have any gaps.

You might have gaps in your record if you were:

• Employed but not earning enough during a qualifying year
• Unemployed and not claiming benefits
• Self-employed but not paying contributions due to small profits
• Living or working overseas.

If you do find that you have gaps, speak to us and we can help you decide if it’s possible, or preferable, to fill them.

Consider deferring if you don’t need the money just yet

It’s worth remembering that one way to make the most of your State Pension might be to defer it. 

The State Pension Age is currently 66 (rising to 67 from 2028). To defer your State Pension, simply do nothing in the approach to your State Pension Age. Not only will your pension automatically defer, but you’ll receive a higher amount when it does eventually come into force.

If you reached the State Pension Age on or after 6 April 2016, your State Pension increases by the equivalent of 1% for every nine weeks you defer – or around 5.8% for the year. 

Be sure you understand what you might get and when

A recent survey by Royal London has found that despite the State Pension reaching a milestone birthday this year, it is still widely misunderstood. The State Pension is 75 this year but UK pre-retirees are still unsure about what they get and when.

The survey found that:

• 51% of UK adults who are yet to access their State Pension either thought that everyone was automatically entitled to the full State Pension or didn’t know who was entitled. 
• 37% believed that the State Pension Age was different for men and women and only 46% correctly answered that men’s and women’s full State Pension is the same 
• 32% of those surveyed believed the State Pension began automatically, despite it needing to be applied for (unless you plan to defer).

If you need any help understanding your State Pension entitlement, contact us now.

Get in touch

It remains to be seen what the Autumn Statement will bring and what the future holds for the State Pension and the triple lock. In the meantime, ensure you get the most out of your entitlement by including the State Pension in your long-term financial plans.

If you need help to do this, we’re on hand to help so get in touch now. Please email enquiries@futureplanningwm.co.uk or call 01793 575553.

Please note

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.