The Office for National Statistics (ONS) released data on Tuesday showing that average regular earnings growth, including bonuses, dropped to 4.5% in the three months leading up to June, down from 5.7% the previous month. This decline is largely attributed to a one-time bonus given to NHS staff in June of the previous year.
Contents
- State Pension Boost 2024
- The Triple Lock Policy Explained
- Possible Pension Increases
- Inflation and Wage Data
- Expert Insights
- Helen Morrissey, Head of Retirement Analysis at Hargreaves Lansdown
- Pensioners’ Challenges
- Insights from Steven Cameron, Pensions Director at Aegon
- Loss of Winter Fuel Payments
- Related posts:
State Pension Boost 2024
The information is crucial for the 12.7 million State Pensioners in Great Britain and is likely to impact the yearly April rise as per the Triple Lock policy. Nevertheless, it’s crucial to note that the earnings growth number utilized for the Triple Lock is derived from data collected from May to July, which the ONS will publish in September.
The Triple Lock Policy Explained
The New and Basic State Pensions increase annually under the Triple Lock policy, with the rise determined by the highest of three metrics:
- Average annual earnings growth from May to July
- Consumer Price Index (CPI) in the year to September
- A fixed rate of 2.5%
Possible Pension Increases
The recent earnings growth data suggests that the full New State Pension could rise by nearly £10 per week, from £221.20 to £231.15. Given that payments are typically made every four weeks, this totals £924.60.
Similarly, the full Basic State Pension could increase by £7.60 per week, from £169.50 to £177.15, or £708.60 every four weeks.
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Inflation and Wage Data
With inflation currently at 2.0%, experts believe wage data will likely determine the pension increase.
Expert Insights
Helen Morrissey, Head of Retirement Analysis at Hargreaves Lansdown
Helen Morrissey remarked that wage growth remains strong, making it likely that next month’s figure will be used to determine the State Pension increase under the Triple Lock. This month’s figure is 4.5%, down from last month’s 5.7%, due to last year’s NHS bonuses.
She also noted that if the figure stays the same next month, the full New State Pension could increase by about £517, bringing it to around £12,019 annually.
Morrissey pointed out the impact of the frozen Personal Allowance at £12,570, which is pushing more pensioners closer to the tax threshold. “Frozen tax thresholds mean the full New State Pension is nearing the point where it becomes taxable, and a similar increase next year could push it over. With these freezes lasting until 2028, pensioners relying solely on the State Pension might see part of it taxed.”
Pensioners’ Challenges
The Hargreaves Lansdown Savings and Resilience Barometer shows that only 38% of households are on track for a moderate retirement income, highlighting a significant challenge. The new Labour government will need to address the impact of long-term illness on the workforce.
Insights from Steven Cameron, Pensions Director at Aegon
Steven Cameron observed that the NHS bonus from last year is expected to “suppress the figure due to be announced next month,” though he still anticipates the increase will be based on earnings growth.
He explained that the exact figure for the Triple Lock is the year-on-year earnings increase from May to July 2024, to be published in mid-September. State Pensioners might see around a 4.5% rise unless there are major changes.
Cameron also mentioned that the June 2023 NHS bonus will affect the May to July 2024 calculation, which may disappoint pensioners who were hoping for a larger increase.
Loss of Winter Fuel Payments
Cameron emphasized that this year, at least £200 in Winter Fuel Payments will be lost by 10 million pensioners. “While next April’s State Pension increase may exceed current inflation, any real-term gain will be significantly offset by the loss of the Winter Fuel Payment,” he added.
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