RETIRED people are set to get a bumper state pension increase next year, according to the latest forecasts.
The Office for Budget Responsibility said state pensions could jump as much as 8% in 2022 – a record increase.
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The state pension rises every year either by the rate of inflation or average wage growth – whichever is highest.
This is called the triple lock, and will see pension payments soar 8% next year, in line with the rise in wage growth in the three months to July.
Top tips to boost your pension pot
DON’T know where to start? Here are some tips from financial provider Aviva on how to get going.
- Understand where you start: Before you consider your plans for tomorrow, you’ll need to understand where you stand today. Look into your current pension savings and research when you’ll be eligible for the state pension, and how much support you’ll receive.
- Take advantage of your workplace pension: All employers are legally required to provide a workplace pension. If you save, your employer will usually have to contribute too.
- Take advantage of online planning tools: Financial providers Aviva and Royal London have tools that give you an idea of what your retirement income will be based on how much you’re saving.
- Find out if your workplace offers advice: Many employers offer sessions with financial advisers to help you plan for your future retirement.
Wages have soared because earnings were low in lockdown, but have jumped as the economy has reopened.
“If earnings growth in the three months to July period that determines triple lock uprating for next April was 8%, as some expect, that would add around £3 billion a year to spending,” the OBR fiscal risks report said.
Chancellor Rishi Sunak is likely to face pressure to suspend the rise, given the unusually high spike.
However, the government has ruled out scrapping the triple lock altogether.
What is the state pension?
For the 2021-22 tax year, the new full state pension is set at £179.60 a week.
This is what the state pays those who reach state pension age after April 6, 2016.
The basic state pension – for older retirees – is set at £137.60 per week.
Check on gov.uk’s website to see what your state pension age is.
How much you actually get depends how much you’ve paid in national insurance contributions throughout your working life.
If you have made at least 35 years of qualifying national insurance contributions, you may qualify for the maximum amount.
To get any state pension at all, you will need at least 10 years on your national insurance record.
If you have gaps in your contributions, due to childcare responsibilities for example, you might be able to apply for pension credits to top up your retirement fund.
How much extra you could get
If the state pension rises 8%, then the weekly maximum payment amount will jump to £194 from next April.
The basic state pension would increase to £149.15.
However, the amount pensioners actually receive is dependant on their national insurance contributions.
In total, the triple lock will cost the public purse an extra £3bn a year, the OBR said.
This retail worker shared how he became a pension millionaire with more than £1million saved.
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