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21 Oct 2020

State pension to rise by up to £229 in 2021 thanks to the triple lock guarantee

Pensioners will get a pay rise that beats inflation and earnings growth

Millions of pensioners will receive a pay rise of 2.5% from April 2021, in line with the triple lock guarantee - equating to a boost of up to £228.80 for the year.

The 2.5% rise was confirmed after the Office for National Statistics (ONS) revealed today that CPI inflation measured 0.5% in September.

The state pension payment is protected by a triple lock guarantee, which means that every April it will increase by either September's rate of inflation, earnings growth or a guaranteed minimum of 2.5% - whichever is larger.

Here, Which? reveals how much the state pension will pay next year, as well as what will happen to the additional state pension and lifetime allowance limit.

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How much will the state pension pay in 2021?

Millions of pensioners will be shielded from negative earnings growth and receive a 2.5% state pension rise next year.

The guaranteed minimum won't be as big as the rise that came in on 6 April 2020, which at 3.9% was the biggest state pension rise since 2012.

Pensioners who are entitled to the full new single-tier state pension will get £179.60 a week from 6 April 2021, up from £175.20.

The change means pensioners will be up to £228.80 better off by the end of the 2021-22 tax year, taking their total income to £9339.20.

Pensioners that reached state pension age before April 2016 and receive the basic state pension will see their weekly pension payments rise from £134.25 to £137.65 next year.

This amounts to a £176.80 pay rise in 2021-22, with income rising to £7,157.80 a year.

New state pension (weekly)New state pension (annual)Basic state pension (weekly)Basic state pension (annual)
6 April 2020 to 5 April 2021£175.20£9,110.40£134.25£6,981
6 April 2021 to 5 April 2022£179.60*£9,339.20£137.65*£7,157.80

*Figures rounded to the nearest 5p.

How does the triple lock work?

State pension payments are protected by a triple lock guarantee.

This means payments are increased each year by whichever rate is higher out of CPI inflation for September, average earnings growth (as of July) or 2.5%.

As September's CPI measure was 0.5%, and average earnings growth was recorded at -1% due to the effects of furlough pay and reduced bonuses, the government will use the 2.5% measure to increase state pension payments next year.

The government introduced a new Bill last month to ensure that state pension payments would rise next year - previously, the triple lock had included a technical detail which said state pension payments could only rise if average earnings growth had risen.

Due to the coronavirus pandemic that wasn't the case this year as average earnings measured -1% - a figure which, before the new Bill was introduced, would have frozen state pension payments in 2021-22.

The table below shows how the state pension has increased since 2012.

Tax yearSeptember inflation (CPI)Average earningsGuaranteed minimumWhich part of the triple lock was used to raise the state pension?
6 April 20125.2%2.7%2.5%Inflation (CPI)
6 April 20132.2%1.5%2.5%Guaranteed minimum
6 April 20142.7%1.2%2.5%Inflation (CPI)
6 April 20151.2%0.6%2.5%Guaranteed minimum
6 April 2016-0.1%2.9%2.5%Average earnings
6 April 20171%2.4%2.5%Guaranteed minimum
6 April 20183%2.3%2.5%Inflation (CPI)

How much additional state pension will I get?

If you reached state pension age before April 2016, the state pension you receive is made up of two amounts - the basic state pension and an additional state pension.

The additional state pension isn't linked to the triple lock guarantee and instead increases according to CPI inflation each year.

The amount you get depends on the number of National Insurance contributions (NICs) you made before you retired, your earnings, whether you contracted out and if you topped up your basic state pension. But if you receive any additional state pension, you will see a rise of 0.5% from 6 April 2021.

If you reached state pension age after April 2016, you'll be eligible for the new flat-rate state pension, which is currently £175.20 and increased each year by the triple lock guarantee.

You may earn more than this if you have built up some additional state pension - known as your 'protected payment'. This will also rise in line with September's CPI inflation, so you'll see a 0.5% increase from 6 April 2021.

What will the lifetime allowance limit be?

September's inflation figure also has an impact on the lifetime allowance (LTA), which is the total amount you're allowed to save across your pensions tax-free.

This has gradually been scaled back over the past 10 years. Back in 2010 it was £1.8m; the last cut was in 2016-17 when it was reduced from £1.25m to £1m.

Since then, the LTA has been increased in line with CPI inflation. Currently, it stands at £1,073,100 - today's inflation announcement means it will rise by 0.5%, taking it to £1,078,500 (rounded to the nearest £100) from next April.

How to check your state pension

The state pension is a benefit paid by the government to those who have reached state pension age.

The amount you get depends on how many NICs you've made during your working life.

You need at least 35 qualifying years of contributions to qualify for the full new state pensionand at least 10 years' worth to receive anything at all.

If you reached retirement age before April 2016, you'll need 30 years of contributions to get the full basic state pension.

For anyone who hasn't yet reached state pension age, you can use an online government tool to check your state pension forecast, which will tell you how much you can get, when you can start receiving payments and whether you're able to increase it.