State pensions are set to be awarded their second-biggest rate increase next year – but experts believe this is “unsustainable” in the long term.
Retirement payments will go up by 8.5 percent in 2024 if the Government keeps to its triple-lock pledge.
The triple-lock is a promise to raise state pensions by either the rate of inflation, average earnings or 2.5 percent; whichever is higher.
In August, the rate of average wages including bonuses between May to July was confirmed to be 8.5 percent.
As it was higher than September’s Consumer Price Index (CPI) inflation rate of 6.7 percent, it is likely this will be the rate at which state pensions will go up by.
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If implemented, this would be the second biggest triple-lock rate hike ever after this year’s 10.1 percent increase.
The new state pension will rise by £901.02 to £11,501.22 a year in 2024 if the retirement payments goes up by 8.5 percent.
In comparison, the “old” state pension would also increase next year by £690.40 to £8,812.80.
Despite this, experts are unsure whether the triple lock is sustainable due to the financial burden on the public purse.
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Steven Cameron, the pensions director at Aegon, broke down why retirees are in line for a big payday next year.
He explained: “While the year-on-year inflation was unchanged this month from last, it had previously decreased for three consecutive months, with the Government committed to reducing it to around five percent by the end of the year.
“This is still far above the Bank of England’s two percent target, so the headline rate may fall even further as we head into the early months of 2024.
“So a state pension increase of 8.5 percent could well be double the ruling rate of inflation come next April.”
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Despite this, the retirement expert cited the issues raised by keeping the state pension triple lock in its current iteration.
Mr Cameron added: “While an 8.5 percent increase would be welcome news for state pensioners’ purchasing power, it would do little to quieten the growing concerns that the triple lock in its current form is unsustainable longer term.
“With the burden on current workers who pay for the state pension through National Insurance increasing sharply, even if the Government refrains from fiddling with the figures this time round, the inflation figure will only amplify calls for whoever is in power after the General Election to review the triple lock to make it intergenerationally fair.”
The payment rate hike to state pensions will be implemented from April 2024.
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