Andrew Tully comments on State Pensions likely to increase by 4% from April 2025 up by over £450
The Office for National Statistics (ONS) issued earnings figures today which will drive state pension increases from April 2025.
The Triple Lock increases to the basic and new State Pension are the greater of:
- Annual CPI inflation to September (announced October);
- Growth in annual earnings including bonuses (Total Pay) for the period May-July; and
- 2.5%.
We believe CPI is going to come in between 2.5% and 3% for the year to September (this will be confirmed in a few weeks’ time on 16 October). So the announcement this morning of earnings increases – 4% for May-July - will be the highest figure in the triple lock commitment and drive state pension increases from April 2025.
Although it’s worth noting the increase in total pay at 4% is lower than the increase in regular earnings excluding bonuses (which was 5.1%). This is as a result of one-off bonuses paid to NHS staff in June 2023. That has an impact on the year-on-year increase in Total Pay, distorting the normal relationship between Total and Regular Pay.
The new state pensions from April 2025
- The headline single tier state pension will likely rise from April 2025 to £230.05, up from the current £221.20 a week
- The maximum basic state pension paid to those who reached state pension age before 6 April 2016 is currently £169.50 a week and it will likely increase to £176.30 a week
- While these are the headline rates many people receive less
- A 4% increase in state pensions will cost around £3.6 billion a year
- While the headline state pension increases by the triple lock, other parts of the state pension such as SERPS/S2P, the graduated pension, protected payments and benefits for deferring, will go up by the lower CPI figure (to be confirmed in October).
- People can check their own state pension forecast, taking into account their national insurance record, on the government’s website > www.gov.uk/check-state-pension
Andrew Tully, Technical Services Director at Nucleus said:
“This approx. £460 a year increase in the state pension from April 2025 follows very large increases over the last couple of years and will be a welcome boost to many pensioners. However, it comes at a time when the Government has limited the winter fuel payment to those receiving pension credit or a limited number of other benefits. These changes mean about 1.5 million people will be eligible, down from 11.4 million when the payment was universal.For some pensioners the extra £460 a year will be at least partly offset by losing £200-£300 through the reduction in scope of the winter fuel payment.
While the headline state pension increases by the triple lock, other parts of the state pension such as SERPS/S2P, the graduated pension, protected payments and benefits for deferring, will go up by the lower CPI figure which will be confirmed in October.
This increase pushes the headline state pension figure closer to the frozen personal allowance of £12,570, making it likely more pensioners solely in receipt of the state pension will start to pay income tax. This brings the interaction of state pensions, the triple lock, means-tested benefits, and personal tax allowances sharply into focus. ’
The history of the triple lock
The triple lock was introduced from 6 April 2011 and means the basic state Pension and Single Tier State Pension increase by the highest of earnings, inflation (CPI) and 2.5%.
Since 2011/12, the state pension has been increased as shown in the table below:
| Tax year | Rise in state pension | Based on |
|---|---|---|
| 2011/12 | 4.6% | RPI(1) |
| 2012/13 | 5.2% | CPI |
| 2013/14 | 2.5% | Fixed 2.5% |
| 2014/15 | 2.7% | CPI |
| 2015/16 | 2.5% | Fixed 2.5% |
| 2016/17 | 2.9% | Earnings |
| 2017/18 | 2.5% | Fixed 2.5% |
| 2018/19 | 3.0% | CPI |
| 2019/20 | 2.6% | Earnings |
| 2020/21 | 3.9% | Earnings |
| 2021/22 | 2.5% | Fixed 2.5% |
| 2022/23 | 3.1% | CPI(2) |
| 2023/24 | 10.1% | CPI |
| 2024/25 | 8.5% | Earnings |
RPI inflation was the previous basis for State Pension indexation before the triple lock and the Government chose to use it in 2011/12.
Due to the impact of the Covid pandemic the Government chose to suspend the triple lock and use the higher of CPI and the fixed 2.5%.