State pensioners are set for another sizeable increase to their payments next year with an extra £715 added to their income.
With the triple lock delivering a 4.1% pay boost last month, experts have been wondering which element of the metric will determine next year’s increase.
The policy guarantees payment rates go up in line with the highest of the rise in average earnings, inflation or 2.5%.
Aaron Peake, personal finance expert at free credit score service CredAbility, explained what the latest figures indicate for next year’s increase,
He said: “Right now, earnings growth is slightly ahead of inflation, so that’s the frontrunner for determining the rise in 2026. If we take current wage growth figures of around 6%, that’s the ballpark for next year’s state pension increase.”
A 6% rise in payments would mean the full new state pension would rise from the current £230.25 a week to £244 a week, an increase of £715 a year.
This would raise the full basic state pension from £176.45 a week to £187 a week, a payment boost worth £548.60 a year.
However, Mr Peake warned it’s still “early days” as to whether inflation or earnings will prove to be the key figure for next year’s increase.
The rise in earnings figure used for the triple lock for the next year is based on the figures over the three months from May to July, and it’s the inflation figure for the year to September that is used for the calculation.
Nonetheless, Mr Peake said next year’s increase may well be “more generous” than the 4.1% rise state pensioners enjoyed last month.
He said: “That would be a welcome boost, but it won’t necessarily stretch as far as people hope. Many essentials are still more expensive than they were two or three years ago.”
He encouraged pensioners to get on top of their finances, such as by setting up a monthly budget and looking for areas where you could reduce your spending.
For those who want to build up their savings, Mr Peake suggested one type of account that may be worth looking at. He said: “A high-interest easy access savings account could be a good option, especially if rates remain fairly high.
“These accounts let you dip in and out if needed, which suits people on a fixed income. If you don’t need access straight away, fixed-rate bonds usually offer better returns, and they give you peace of mind knowing your money is locked away and earning interest.”
He also encouraged people to check if they are eligible for any benefits they are not claiming, such as Pension Credit, with the average claim worth over £3,900 a year.