September's inflation figures reveal around 13 million pensioners are set for a pay rise of up to £221 a year from 6 April 2019.
The Office for National Statistics (ONS) has reported that inflation, as measured by the consumer prices index (CPI), fell to 2.4% in September, down from 2.7% in August. As this is below average earnings, the state pension is due to rise by 2.6% in 2019, thanks to the government's triple lock policy.
September's inflation rate, as well as annual earnings, hasa direct impact on how much the state pension is increased each year to keep up with the cost of living.
We take a look at how much the state pension will pay next year, as well as what will happen to the additional state pension and the lifetime allowance limit.
The change means this group of pensioners will be £221 better off by the end of the 2019/20 tax year, with total annual income boosted from £8,546.20 to £8,767.20a year.
Those who receive the basic state pension will get a boost of £3.25per week, with the state pension rising from £125.95 to £129.20 per week from 6 April 2019. This change will give this group of pensioners a £169 boost in 2019/20, with total annual income rising from £6,549.40 to £6,718.40 a year.
|New state pension (weekly)||New state pension (annual)||Basic state pension (weekly)||Basic state pension (annual)|
|6April 2018 - 5April 2019||£164.35||£8,546.20||£125.95||£6,549.40|
|6April 2019 - 5April 2020*||£168.60||£8,767.20||£129.20||£6,718.40|
|Change||+£4.25 per week||+£221 per year||+£3.25 per week||+£169 per year|
*Figures rounded to nearest 5p
The state pension (including both the pre-April 2016 basic state pension and the new state pension) is protected by the 'triple lock' guarantee.
This means the state pension rises each year by the greater of annual price inflation, average earnings growth or a guaranteed 2.5% minimum.
The government takes September's CPI inflation and uses the three-month average of weekly earnings from July to help work out what the uprating will be.
Since September's 2018 inflation figure was 2.4% andaverage earnings were 2.6%, the government is expected to use average earnings to uprate the state pension from 6 April 2019.
Here's how the state pension has been boosted since the triple lock guarantee was introduced.
|Tax-year||September inflation (CPI)||Average earnings||Guaranteed 2.5% minimum||Which part of the 'triple lock' kicked in?|
|6 April 2012||5.2%||2.7%||2.5%||Inflation (CPI)|
|6 April 2013||2.2%||1.5%||2.5%||Guaranteed minimum|
|6 April 2014||2.7%||1.2%||2.5%||Inflation (CPI)|
|6 April 2015||1.2%||0.6%||2.5%||Guaranteed minimum|
|6 April 2016||-0.1%||2.9%||2.5%||Average earnings|
|6 April 2017||1.0%||2.4%||2.5%||Guaranteed minimum|
|6 April 2018||3%||2.3%||2.5%||Inflation (CPI)|
The coalition government created the triple lock to help lift pensioners out of poverty.
But the government's actuary department estimates the triple lock has added £6bn to the cost of running the state pension, compared to increasing payments by inflation alone. It has also warned that the National Insurance fund, which pays out social benefits such as the state pension,.
Many have called for the triple lock to be scrapped to help cut the costs of running the state pension.
A recent report from the Pensions Policy Institute (PPI) suggested that alternative pension guarantees could include:
However, the PPI warns that if the government did scrap the triple lock guarantee, 700,000 more pensioners would be living in poverty by 2050.
The government has committed to maintaining the triple lock for the duration of this Parliament, so if we do see any change, it will be after the next election.
The additional element of the old state pension is only increased by CPI inflation, rather than linked to the triple lock. So, if you receive any additional state pension, this will be increased by 2.4% from 6 April 2019.
If you reached state pension age after 6 April 2016, you are eligible for the new single-tier state pension, which is currently £164.35 and is uprated by the triple lock.
You might get more than the full rate of the new state pension if you have built up some additional state pension. This is also increased in line with September's CPI inflation rate, so will rise 2.4% from 6 April 2019.
September's inflation figure also has an impact on the lifetime allowance (LTA), which is the total you can save across your pensions tax-free.
This allowance was previously as high as £1.8m in 2010 but the government has gradually cut it down.
The last reduction in the LTA was from £1.25m to £1m in the 2016/17 tax year. Since the start of this tax year, the LTA has been increased in line with CPI and currently stands at £1.03m.
Today's inflation announcement means the LTA on private pensions will increase by £24,800 (rounded to the nearest £100) from next April taking it to £1,054,800.
The state pension is a weekly benefit paid by the government that you receive once you've reached your state pension age.
To qualify for the payment, you need to make a certain number of National Insurance contributions.You need to have 35 qualifying years to get the full new state pension and at least 10 years of contributions to get anything at all.
If you reached state pension age before April 2016, you only need 30 years' worth of National Insurance contributions to get the full basic state pension.
Editor's note: this story was updated at 9:58 with rounded figures.