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16 Oct 2019

State pension to rise by up to £343 a year in 2020

Millions of pensioners will get a bumper pay rise from April 2020

Millions of pensioners will receive a pay rise of 3.9% in April 2020, in line with average earnings - equating to an increase of up to £343.20 for the year.

The 3.9% rise was confirmed after the Office for National Statistics (ONS) revealed today that inflation remained at 1.7% in September. The state pension payment is protected by the 'triple lock' guarantee which means it increases each April by the greater of September's price inflation, earnings growth or 2.5%.

This year, the highest measure was average earnings, guaranteeing a 3.9% boost on 6 April 2020.

Here we reveal 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 2020?

Millions of pensioners will enjoy the biggest pay rise since 2012 next year, with a 3.9% boost to payments, thanks to earnings growth between May and July.

Previously the ONS had calculated earnings growth between May and July was 4% but it revised this down to 3.9% yesterday.

Pensioners who are entitled to the full new single-tier state pension will get £175.20 a week from 6 April 2020, up from £168.60.

The change means this group of pensioners will be up to £343.20 better off by the end of the 2020-21 tax year, taking their total income to £9,110.40.

Pensioners that reached state pension age before April 2016, and receive the basic state pension, will see their weekly payment rise from £129.20 to £134.25 a week next year.

This amounts to a £262.60 pay rise in 2020-21, with income rising to £6,981a year.

New state pension (weekly)New state pension (annual)Basic state pension (weekly)Basic state pension (annual)
6April 2019 - 5April 2020£168.60£8,767.20£129.20£6,718.40
6April 2020 - 5April 2021£175.20*£9,110.40£134.25*£6,981
Change+ £6.60+ £343.20+ £5.05+ £262.60

*Figures rounded to nearest 5p

How does the triple lock work?

The state pension is protected by the 'triple lock' guarantee.

This means payments are increased each year by either annual price inflation in September, average earnings growth (as of July) or a guaranteed minimum of 2.5%.

As September 2019's CPI measure was 1.7% - the lowest since December 2016 - and average earnings growth was recorded at 3.9%, the government will use average earnings to increase the state pension for the second year running.

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

Tax yearSeptember inflation (CPI)Averages 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, your state pension is made up of two amounts: the basic state pension and an additional state pension.

The additional state pension is not linked to the triple lock guarantee and is increased by CPI inflation each year.

The amount you earn varies based on the number of National Insurance Contributions (NICs) you've made, 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 1.7% from 6 April 2020.

If you reached state pension age after 6 April 2016, you will be eligible for the new flat-rate state pension, currently £168.60 a week (uprated by the triple lock guarantee). However, you may earn more than the full amount if you have built up some additional state pension. This is called your 'protected payment', which will also rise by 1.7% in line with September's inflation from 6 April 2020.

What will the lifetime allowance limit be?

September's inflation figure also has an impact on the lifetime allowance (LTA), the total you can save across your pensions tax-free.

Back in 2010, this was £1.8m but the government has gradually scaled it back. The last cut, in 2016-17, reduced it from £1.25m to £1m.

Since 2018-19 the limit has been increased in line with CPI and currently stands at £1,054,800.

Today's inflation announcement means the new LTA allowance will increase by more than £17,900, taking it to £1,072,700 (rounded to the nearest £100) from next April.

How to check your state pension

The state pension is a benefit paid by the government once you've reached your state pension age.

The amount you get is based on the number of National Insurance Contributions (NICs) you make.

You need at least 35 qualifying years of contributions to receive the full new state pension and at least 10 years to receive anything at all.

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

If you have yet to reach state pension age, you can check your state pension forecast using the government's 'check your state pension' website using your personal tax account.

This article has been updated to show the revised earnings growth figures from the ONS.