Martin Lewis warns millions of people will get 'far smaller' state pension rise

Martin Lewis explained on the MoneySavingExpert.com website that the majority of people claim the basic state pension, which is the older system and is worth less

Martin Lewis has warned most pensioners will get a “far smaller” increase in their state pension payments.

The state pension rises every April in line with the triple lock promise. The triple lock guarantees the state pension increases by the highest out of inflation (using the previous September inflation figure), wages (average growth between May and July) or 2.5% - whichever is highest.

Wage growth was this week revised to 4.1% and as this is higher than inflation, which has fallen to 1.7%, it is likely state pension payments will go up by 4.1% next year. Rachel Reeves will confirm this in her Budget on October 30. For someone claiming the new state pension, they could see their payments rise by more than £470 a year - but for many people, the rise will be much smaller.

Martin Lewis explained on the MoneySavingExpert.com website that the majority of people claim the basic state pension, which is the older system that is used for men born before April 6, 1951, and women born before April 6, 1953. The basic state pension is worth much less than the new state pension, and will rise by more than £360.

The other thing to keep in mind, is these figures are for someone claiming the maximum level of state pension, which is based on your National Insurance record. Most people need to have 30 qualifying years of National Insurance contributions to get the full level of basic state pension.

Martin said: “That figure is for the full – new – State Pension, which only applies to the one in four who hit state pension age on or after 6 April 2016. The majority are still on its predecessor, the old State Pension, which is lower, and so the 4.1% rise of that is the smaller figure: £362.65.

“Plus those figures only apply to those who get the full State Pension, which comes from having enough National Insurance (NI) years – usually around 35 (though it varies widely). Many, especially those on lower incomes don't have their full years, so get a lower pension and therefore their rise will be smaller still.”

The full new state pension is worth £221.20 a week, or £11,502 a year, and looks set to rise to £230.30 a week, or £11,975 a year, under a 4.1% increase. The full basic state pension is worth £169.50 a week, or £8,814 a year, but this would rise to £176.45 a week, or £9,175 a year, under a 4.1% increase. Many pensioners also face paying more tax next year as the full new state pension edges closer to the current £12,570 tax-free personal allowance.