• State pension to increase to £8,767.20
• Lifetime allowance to increase to £1,054,800
The state pension is expected to rise by 2.6% from April next year, slightly below the 3% increase both enjoyed in 2017/18, after inflation came in below expectations in September.
The Office for National Statistics has today confirmed Consumer Prices Index (CPI) inflation stood at 2.4% in September. The September figure is used for the state pension ‘triple-lock’ uprating.
The triple-lock guarantees the state pension increases in line with the highest of inflation, July’s Average Weekly Earnings growth figure or 2.5%.
As average earnings growth stood at 2.6% in July, this figure will be used to boost the value of the state pension. It means the annual flat-rate state pension will rise in value by £221 from £8,546.20 this year to from April 2019.
The lifetime allowance, meanwhile, will increase in line with September’s CPI inflation figure, meaning it will rise by £24,800 to £1,054,720 next year.
Tom Selby, senior analyst at AJ Bell, comments:
“Today’s figures will provide a welcome income boost to millions of people currently in receipt of the state pension. Those who get the flat-rate amount will see their annual payment increase by over £220 in April next year, a smaller increase compared to last year but still not to be sniffed at. With inflation returning to the economy, the value of protection against rising prices is not to be underestimated.
“In the context of the triple-lock, it’s worth noting the guarantee will cost the Government nothing compared to the earnings and inflation ‘double-lock’ some have proposed. It is only in a low inflation, low earnings environment that the promise begins to bite.
“The Government’s decision to peg the lifetime allowance to inflation from 2018/19 bucked a long-established trend of sharp cuts in the limit. The extra £24,800 available from April next year will be useful to savers, representing a tax-free cash boost of £6,180.
“Of course this assumes Chancellor Hammond won’t once again take the axe to the lifetime allowance in his Budget later this month. Such a move would risk sending a seriously negative anti-savings message, as well as adding more unwelcome complexity as new ‘protections’ would inevitably be needed for those close to or over the new, lower limit.”
