Retired people are extra likely to get a record state pension hike of around 8% next year, a second government forecaster confirmed.
Every year the state pension will go up by the highest of inflation, 2.5% or average wage growth during a set period – under an agreement called the triple lock.
But the triple lock is set to work in pensioners’ favour next year, because wage growth is set to rise 8% in the three months to July, according to the Office for Budget Responsibility (OBR) today.
This record rise in wages is because average earnings were lower during lockdown, then rose again as the country began to return to work.
An 8% increase in the period means the full state pension rises from the current maximum of £179.60 a week to £194 from April 2022.
Last month the Office for National Statistics made a similar judgement to the OBR, saying wages had risen 8.4% in the year to April 2021.
How much extra state pension would I get?
An 8.4% rise would mean the current full state pension goes up to £194.60 a week from next April.
But the actual amount you get depends on your National Insurance record.
Older pensioners who claim the basic state pension, currently no more than £137.60 a week, would get an extra £11.55, taking the total to £149.15.
This is open to men born before 6 April 1951 and women born before 6 April 1953.
The 8.4% rise would mean the Treasury spends £3billion extra on the state pension in 2022.
How certain is this state pension increase?
Technically it’s 100% certain – the way the state pension triple lock has worked since 2010 would guarantee it.
But this is an unusual time, and it is possible politicians step in to cut short pensioners’ celebrations.
Some Conservative MPs already want to water down the massive increase, arguing the country cannot afford to pay pensioners extra due to a wages quirk when it already has a huge bill for Covid-19.
Despite popular belief, there is no state pension retirement ‘pot’ that is built up as we work and pay National Insurance.
Instead, the state pension for retirees today is paid by people currently working.
Because of this, MPs also think workers will object to a big state pension rise when many have had pay and benefits slashed during the pandemic.
Speaking to the Telegraph, Nigel Mills, Tory chairman of the all-party parliamentary group on pensions, said: “The triple lock wasn’t meant to be based on artificially out-of-line earnings data.”
Chancellor Rishi Sunak has already reportedly considered watering down the triple lock, even before the rise in wages.
However, the current 8% to 8.4% increase could also change slightly in the next couple of months.
The state pension increase is signed off in November every year.
This April the state pension rose by 2.5% a week thanks to the triple lock.
The state pension is usually paid every four weeks , in arrears.
It is vital for retirees, but many are underpaid without realising and not getting the payments they deserve.
If you you have shortfall in your pension, you may be able to apply for pension credits to top it up.