State pension to rise by 2.5 per cent in April

Pension - Photo Credit: Fotolia

From next spring, people on the new flat rate pension will see their weekly payments rise from £155.65 to £159.55, while the old state pension will increase by £3 to £122.30.

The increase is in line with earnings growth and therefore meeting the promises outlined in George Osborne’s triple lock pledge on pensions.

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Pressure has been mounting to scrap the policy, which ensures the state pension increases each year until 2020 by inflation, earnings growth or 2.5 per cent - whichever is higher.

Chancellor Philip Hammond in his Autumn Statement hinted the commitment could be dropped as he pledged to appraise “public spending priorities and other commitments” at the next Spending Review.

And Work and Pensions Secretary Damian Green was tight-lipped on the subject over the weekend, saying it is “far too early” to predict what will feature in the Tories’ 2020 manifesto.

The Pensions Policy Institute (PPI) have released figures that show the cost of providing the state pension will rise from 5.3% of GDP to 7.2% by 2046 if ministers maintain the triple lock commitment

It comes after a former minister claimed the Government may be preparing to increase the official state pension age to 70 for people currently in their 20s.

Steve Webb said the DWP were preparing documents that suggest a “more aggressive timetable” on state pension age increases.

It is currently due to rise to 66 between 2018 and 2020, to 67 between 2026 and 2028, before increasing to 68 between 2044 and 2046.

The PPI found that automatic enrolment into pensions and the triple lock were set to increase retirement incomes, but this was offset by increases to the state pension age that meant over their lifetime individuals would receive less on average.

“Looking forward, both the ‘triple lock’ and automatic enrolment could significantly increase the level of people’s retirement incomes, said Daniela Silcock, head of policy research at the PPI.

“For those nearest state pension age the triple lock has the most immediate effect whereas younger individuals may gain most from automatic enrolment.”