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17th July 2023
The State Pension could be in line for an increase of around 7% in 2024, thanks to persistently higher inflation.
The old-age benefit has its annual increases calculated based on the triple lock policy.
This triple lock guarantees that payments will increase by either average wage increases, average inflation or 2.5% – whichever is higher.
This year, the State Pension received a whopping 10.1% increase thanks to sky-high inflation levels in September 2022 – the month when the increase is decided annually.
With inflation having stayed stubbornly high, it is looking increasingly like another bumper hike is on the way. Inflation is currently at 8.7% CPI according to the Office for National Statistics.*
Prevailing estimates suggest this could be around 7% in September, which would mean this could be how much the next State Pension increases.
How the State Pension works
If you work in the UK, you accrue National Insurance Credits (NICs) over the course of your career. Once you obtain enough NICs, you’ll be eligible for the full State Pension.
If you don’t accrue the full amount, but do accrue some, you’ll still be entitled to some payments.
The full State Pension is currently set at £203.85 per week, paid every four weeks.
The current State Pension age is 66, but is gradually increasing from 6 May 2026 or those born after April 1960 to 67. More rises are planned in future, but are not currently 100% certain thanks to Government wrangling on the issue.
State Pension and cashflow modelling
Even if you’ve worked hard to build up a decent personal retirement pot, the State Pension is an extremely valuable financial resource, especially as you get older. Because the payments are guaranteed, they are a very useful way of preparing cashflow modelling for your retirement.
Cashflow modelling takes into account your income, assets and liabilities in order to give you a picture of how much money you’ll be able to generate each month in retirement.
The usefulness of the State Pension to this is huge as it’s a potentially guaranteed income stream later in life which can help your earlier retirement years bear more fruit, if planned correctly.
There are additional key considerations that cashflow modelling can help with, such as deferring the State Pension. If you have enough in early retirement years not to need State Pension payments, then deferring them can be very lucrative when you do begin to take that income.
For every nine weeks you defer, you’ll get an extra 1% on your payments, or equivalent to an extra £2 a week. One year of deferral will net £614 a year extra, based on current payment levels.
If you would like to discuss your State Pension options, cashflow modelling your portfolio or anything else related to this, don’t hesitate to get in touch.
*Correct at the time of writing but subject to change
