Many state pensioners will get a much smaller increase. Their income will rise by less than inflation, which means it’s shrinking in real terms.
That’s down to a quirk in complicated state pension rules, that successive governments have refused to correct.
And there’s no sign that Labour will sort this one out either.
So what’s going on?
The state pension is made up of several different elements, but the state pension triple lock doesn’t apply to all of them.
The single-tier new state pension, paid to those who retire from April 6, 2016, benefits from full triple lock protection. That means it rises each year either with inflation, earnings or 2.5% each year, whichever is highest.
In April, it will line with rise with earnings, which grew 4.1% in the year to September. By contrast, consumer price inflation (CPI) rose just 1.7% that month.
As a result of the earnings link, the full new state pension will climb from today’s £11,502 to around £11,974 a year.
Some 4.4 million get the new state pension, while around 8.6million older retirees get the basic state pension.
This is where things get tricky.
The basic state pension itself also increases by the triple lock. But there are two catches.
The first is that the full basic state pension is lower at just £8,814 a year right now.
The 4.1% triple lock increase will lift it to £9,175 a year. But that’s still £2,799 below the maximum new state pension.
The gap between the two widens every year. Both rise by the same percentage, but the new state pension starts from a higher base so the hike is worth more.
This doesn’t mean older pensioners are being completely ripped off.
Many get additional state pension on top, such as the state earnings-related pension scheme (Serps) or state second pension (S2P).
As a result, they get more pension in total, particularly men who built up Serps and S2P while working.
Women on the basic state pension often struggle, though, as they typically built up less additional state pension after giving up work to raise a family or care for loved ones.
The new state pension was designed to put that right. But there’s a second catch.
For some weird reason the triple lock doesn’t apply to Serps and S2P, or lesser-known state pension elements such as Graduated Pension, Increments and Protected Payment.
Instead, they increase by inflation, based on September’s figure.
That wasn’t a problem during the recent inflation spike, but it’s a big issue today as earnings rise fastest of the three triple lock elements.
Stephen Lowe, a director at the retirement specialist Just Group, said it’s “impossible to understand the logic” of this two-tier uprating system. “The upshot is a further widening of the gap between the basic state pension and new state pension.”
Andrew Tully, technical services director at Nucleus Financial, said with inflation forecast to hit 3.7% by the summer, the additional state pension will actually shrink in real terms. “Millions of older pensioners will feel worse off, especially if they’ve lost the Winter Fuel Payment too.”
The gap between the new and basic state pensions will continue to widen, until everyone gets the new state pension in the 2040s. Until then, millions of older pensioners will feel hard done by.
