State pension misses tripling benefit for elderly populace in millions

The state pension is set to increase by 4.1% in April 2025, as announced recently. However, it's important to note that not all state pension payments are covered by the triple lock guarantee, a policy that ensures an annual rise by the highest of inflation, wage growth, or 2.5%.

The triple lock, while beneficial to many, has some exceptions. For instance, pensioners living abroad in certain countries find their state pensions frozen under the triple lock policy, affecting around 450,000 individuals.

The current inflation rate stands at 3.8%, and if the wage growth rate of 4.6% is used in the triple lock next April, it could hike the full new state pension by £551 to £12,524 a year, and the basic state pension by £376 to £9,634.

However, it's essential to understand that the triple lock only applies to the old 'basic' state pension and the new flat rate pension. Other elements such as the state second pension (Serps) are not included in this guarantee. Older pensioners receiving the state second pension are likely to only get around 80% of the triple lock uplift for that part of their pension.

The annual triple lock rise is usually known in October for the following April, with the exact amount confirmed later in the Autumn Budget. It's worth noting that the inflation figure used in the triple lock is for the previous September, while the average wage growth data relates to May to July. Neither of these figures have been published yet.

Steve Webb, a former pensions minister, has commented that different elements of the state pension can go up at different rates. He notes that in a year when wages grow faster than prices, the triple locked elements of the pension will rise by slightly more than other elements.

Looking ahead, Helen Morrissey predicts a state pension triple lock increase "somewhere in the 4-4.5% ballpark for next year". However, some experts like Derek Lee caution that high levels of inflation could make the current state pension increases unsustainable in the long term.

An estimated 6,574,000 pensioners will receive the state second pension in 2026/27, which only increases in line with inflation. On the other hand, the basic state pension and the new flat rate pension are protected by the triple lock.

It's also worth mentioning that people who defer their state pension do not benefit from the triple lock on the extra amount that is paid to them for deferring. Those who choose to delay taking their state pension will see their payments increase by 5.8% for every full year they delay, but this increase is tied to CPI inflation, rather than the triple lock.

In conclusion, while the state pension is set to rise by 4.1% in April 2025, the impact of this increase varies depending on several factors, including where a pensioner lives, the components of their pension, and whether they choose to defer their pension. It's crucial for pensioners to understand these complexities to make informed decisions about their retirement income.