State pension increase to be guaranteedPrime Minister makes pension pledge

06 January 2014

State pension

The Prime Minister has said that the basic state pension will continue to rise by at least 2.5% a year if the Conservatives get re-elected.

Triple lock system to continue

David Cameron pledged to continue guaranteed rises in the basic state pension by retaining the 'triple lock' system if the Conservatives win the 2015 general election.

The Prime Minister sought to reassure older voters that their pay-outs would continue to rise in line with the higher of inflation, wages or 2.5% (the three elements of the 'triple lock') at least until 2020.

The government has said that it is fair to address pensioners at the moment, even though benefits for younger people are being cut. The Labour Party has said that it supports the triple lock 'in principle'.

Vital to get the best deal in retirement

The current state pension of £110.15 a week amounts to £5,727.80 a year, which for many is insufficient to have a comfortable retirement. 

If you have savings in a private pension, it's vital that you get the best deal when you want to convert them into an income for retirement. You can often do this by converting buying an annuity.

The Which? Group offers an independent annuity advice service, Which? Annuity Advisers, that looks through all of the annuity products on offer from a panel of 13 annuity providers. This means we have access to some of the best annuities in the market to get you the right deal.

Until 12 February 2014, you can contact our annuity advisers, who can talk through your retirement options and help you find the best annuity rate in the market. Call us on 0800 316 4860. 

Commitment to state pension

Mr Cameron insisted that pensions would not be hit by continued austerity measures. He said: 'A Conservative government will offer pensioners a more secure future by pledging today that we will carry on using the triple lock after the next election to protect the basic state pension.

'We can only afford to do this because we are taking difficult decisions to cut the deficit and get spending under control as part of our long-term economic plan. I want to do everything we can to help people who have worked hard and done the right thing.'

The basic state pension will be around £440 a year higher from April than if it had been up-rated in line with average earnings since 2011/12 according to the government. Read our guide to find out how much state pension you will get as things stand.

Pensioners to switch annuities

In a separate move, Pensions Minister Steve Webb has said that pensioners should be allowed to switch annuities. The current system means that you are tied to an annuity for life once you purchase it.

The Minister has said that switching annuities should be as easy as switching mortgage deals. In the region of 400,000 annuities are purchased each year, although many people do not realise that they have the option to shop around for the best rate.

Annuity rates have fallen over the last few years and retirees have faced smaller retirement incomes than previously. A recent report by the Financial Services Consumer Panel found that annuity deals have become more complicated and retirees are entering into them without taking advice. 

More on this...