The CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organisations warned earlier this year that hundreds of thousands of Brits living abroad in retirement missed out on the 10.1% State Pension uprating applied to the contributory benefit in April. Nigel Green, of deVere Group, said that an estimated 500,000 older people will “continue to have their pensions frozen in value at the point of retirement date or date of emigration”.
Data from the Department for Work and Pensions (DWP) shows that 12.6 million people are now receiving the State Pension in Scotland, England and Wales, including 1.1m living abroad. Full New State Pension payments are worth up to £203.85 per week, while those on the Basic State Pension can receive up to £156.20.
The UK Government has pledged to honour the Triple Lock guarantee for 2024/25 which means the all-important September Consumer Price Index (CPI) inflation figure could play a crucial role in determining how much State Pension will rise next April.
The Triple Lock policy was introduced by the Coalition Government in 2010 to ensure that the State Pension rises in line with the greater of the September’s CPI inflation rate, earnings growth, or 2.5 per cent. The latest CPI inflation figure is due to be announced by the Office for National Statistics (ONS) on July 19, and it’s an important one to watch out for as the CPI for May was a non-mover at 8.7%.
The Bank of England’s latest CPI inflation rate forecast for September is 7%, which would boost the full New State Pension from £10,600 per year to £11,342 from April 2024 – unless you are one of the half million in a country that does not have an agreement with the UK to increase State Pension payments.
Commenting recently on the 2023/24 State Pension uprating, Mr Green explained: “An estimated 500,000 retired Brits who live abroad will not receive any boost at all. Outrageously, they will continue to have their pensions frozen in value at the point of retirement date or date of emigration.
“Having a frozen pension means that your retirement income falls in real terms year on year due to inflation – and never has this been more true than as the cost of living has soared.”
Retired expats in the European Economic Area (EEA) will continue to receive annual increases to their State Pensions under the Triple Lock scheme, as will those in a host of other countries including the United States, the Philippines and Turkey.
However, Mr Green explained that the majority of affected State Pensioners live in some of the biggest Commonwealth countries, such as Australia and Canada, and, despite paying taxes all their working lives in the UK, and National Insurance Contributions in full, these Brits will miss out on the rise given to others.
He said: “It seems completely unjust that someone living in the USA will receive an extra £1,000, yet someone just across the border in Canada, in the same situation, will not.”
Estimated State Pension payments from April 2024
The estimated calculations below show the current annual rates for the full New and Basic State Pensions at the Bank of England forecasted increase of 7%.
How much someone receives depends on the number of years worth of National Insurance contributions, around 35 is needed for the full New State Pension, but this may be more if you were contracted out – find out more here.
Current Annual Full New State Pension – £10,600
7% inflation – £11,342 (up £742)
- Weekly: £218
- Monthly: £872
Current Annual Basic State Pension – £8,122
7% inflation – £8,691 (up £569)
- Weekly: £167
- Monthly: £658
The latest expenditure figures from the DWP show that the State Pension cost the UK Government an estimated £112.5 billion to deliver in 2022/23 and is forecast to rise to £139.5bn in 2027/28, in real terms. However, in nominal terms the estimated increase is more – from £109.7bn to £147.2bn.
State Pension and income tax
Finance experts at wealth management firm Evelyn Partners said that the latest annual income tax statistics from HM Revenue and Customs (HMRC) estimates that there are 8.1million people over State Pension age paying income tax in the 2023/24 financial year. This is a 25 per cent increase on the 6.47million pensioners who paid income tax in 2020/21.
Gary Smith, Partner in Financial Planning at Evelyn Partners, warns that a “policy showdown is on the horizon” between the Triple Lock and the personal income tax allowance freeze.
He explained: “Both Conservatives and Labour have pledged a commitment to the Triple Lock in their manifestos for the upcoming general election. And the policy of the current UK Government is to keep the personal allowance frozen until at least 2027/28 at £12,570, with no indication of an alternative policy from Labour.
“If the Bank of England’s latest forecast for September inflation of 7% is correct, then the Triple Lock – assuming wage growth does not exceed 7 per cent – will boost the full New State Pension to £11,342 in the 2024/25 tax year.”
Latest State Pension News
He added that in the subsequent three years it will require Triple Lock increases of “just” 3.5 per cent to send the annual State Pension income above the frozen personal tax allowance threshold of £12,570.
He continued: “That then presents a conundrum to the Uk Government of the time: create an administrative and political headache by taxing the State Pension, possibly at source – which would be massively unpopular among the more than 13 million people then expected to be of State Pension age – or make the headache go away by raising the personal tax allowance for everyone.”
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