UK pensioners are set to see their full State Pension increase next year by 3.1% after the Office for National Statistics (ONS) released inflation figures for the 12 months to September 2021. So, how much will pensioners get next year? Let’s find out.
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How much is the State Pension currently?
The UK State Pension is a regular payment from the government that most people get when they reach a certain age.
People who reached the State Pension age on or after 6 April 2016 get the new State Pension. The full amount for this pension is currently £179.60 a week.
Those who reached State Pension age before 6 April 2016 get the basic State Pension. Currently, the full amount is £137.60 a week.
What is the triple lock system?
The State Pension is usually protected by a system known as the triple lock. This ensures that the pension increases every year by the higher of consumer price index (CPI) inflation, average earnings, or 2.5%.
However, with a post-lockdown surge in labour demand causing a sharp spike in earnings, the government decided to temporarily suspend the earnings component of the triple lock. This means that in 2022 the State Pension will be increased by the greater of average inflation or 2.5%.
How much will the State Pension rise by in 2022?
The State Pension will rise by 3.1% in 2022/23, in line with inflation figures released by the ONS.
This means that recipients of the full new State Pension are set to see their weekly payments rise by about £5.55 to £185.15 next April. This translates to an increase of £289.64 per year.
Meanwhile, the basic State Pension will increase by £4.25 to £141.85 per week (an increase of £222.04 a year).
Had the earnings element not been scrapped, pensioners would have seen an 8% boost to their pension. This would have meant an increase of around £14.37 to £194.50 per week for full new State Pension beneficiaries, and an increase of £11.09 to £149 per week for basic State Pension beneficiaries.
This year’s increase will nevertheless be pleasant news for many retirees as it trumps last April’s 2.5% rise. It is also the third-highest yearly increase since the introduction of the triple lock more than a decade ago.
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Can you boost your State Pension?
Not everyone receives the full State Pension. Fortunately, there are ways to increase the amount you get.
If there are gaps in your National Insurance record, you can make voluntary contributions to close the gap.
Claiming National Insurance credits can also help fill gaps in your National Insurance record. Credits are offered for a variety of circumstances. For example, you might be eligible if you’re a caregiver, if you’re disabled or if you’re on sick pay. Visit the gov.uk website for more details on National Insurance credits and how to claim them.
Is the State Pension enough to retire on?
While the State Pension can form a significant part of your retirement income, research has shown that it is not enough to retire on.
For example, according to a report by the Pensions and Lifetime Savings Association, a single person would need at least £10,900 a year for a minimum standard of living in retirement.
However, the maximum new State Pension you can receive per year is £9,628.84 (for 2022/2023). So, as you can see, there is a clear disparity between the costs of retirement and what you can get from the State Pension.
Remember also that the highlighted £10,900 figure is for the most basic of retirement living standards. If you want to be more comfortable in your golden years, you will undoubtedly need more money.
The ultimate implication from all this is not to rely solely on the State Pension to fund your retirement.
How can you make sure you have enough in retirement?
It all starts with clearly outlining the exact kind of retirement lifestyle you want and calculating the amount of money you’ll need.
The next step is formulating a strategy for getting there. This might mean signing up for a workplace or personal pension plan and maximising your contributions. Or it could mean making your savings work harder for you by investing them in the stock market through a tax-efficient stocks and shares ISA.
Whatever you decide, the key is to start making your provisions for your retirement as early as possible. The sooner you start, the bigger your nest egg will be when you finally lay down your work tools.
