Finance experts have issued a warning on the State Pension, urging UK households to ‘be vigilant’ despite the substantial rise that will come into effect from April 2024.
Chancellor Jeremy Hunt’s announcement to fully honour the triple lock formula used to determine annual State Pension increases will see weekly amounts go up to as much as £221. Mr Hunt described it as “one of the largest ever cash increases to the State Pension – showing this Government will always back our pensioners.”
An increase of 8.5 per cent to State Pension amounts is considerably higher than the 6.7 per cent inflation-based boost to all other DWP and HMRC benefits. It will see the full New State Pension go from £203.85 a week to £221.20 a week which, over a year, is a rise of more than £900 from the £10,600 yearly total to £11,502.
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Experts say that although the new amount is a positive step forward and still below the personal allowance of £12,570 before income tax has to be paid, pensioners and retirement planners must look beyond what has been billed as “one of the largest ever cash increases” and ensure they have enough to live on in their later years.
Adam Pope, a pensions expert from Spencer Churchill, has shared his insights on key considerations for Brits in light of this update. He said: “The 8.5 per cent increase in State Pensions is a significant step towards financial security for many Brits, especially with the current cost-of-living crisis. While it offers immediate relief, individuals should still be vigilant about their overall retirement planning, ensuring that their pension arrangements, whether state or private, align with their long-term financial goals.
“This increase, one of the largest in recent times, not only provides a much-needed boost to pensioners but also underscores the importance of understanding and maximising state benefits. Brits need to stay informed about their entitlements to ensure they are not missing out on any key benefits, especially those who have been victims of missold pensions in the past.”
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He added: “While the increase is welcome, it’s essential to remember that relying solely on the State Pension may not be sufficient for a comfortable retirement. This development should serve as a prompt for individuals to review their entire retirement strategy, including any private or occupational pensions, to ensure a comprehensive and secure financial future.
“The commitment to the triple lock and the resulting increase is a strong signal of support for pensioners. However, it also highlights the need for ongoing vigilance in the pension industry to protect individuals from misselling and to ensure that all pension products, whether state or private, are transparent and in the best interests of the retirees.”
Latest figures from the Pension and Lifetime Savings Association show that a single person would need £12,800 a year to achieve the minimum retirement living standard, £23,300 a year for a moderate lifestyle, and £37,300 a year for comfortable living. For couples, these figures rise to £19,900, 34,000 and £54,500 respectively.
The minimum level covers all basic needs plus some treats including holidays in the UK, dining out once a month and taking part in affordable leisure activities about twice a week. But it’s important to note that next year’s State Pension is still £1,300 a year short of that lowest-level amount.
A moderate income allows for pensioners to have one holiday abroad a year and dine out a few times every month, while a comfortable income would provide enough for two overseas holidays per year and more luxuries and spontaneous spending, the association said.
