Full state pensioners get £17,000 after triple lock rises

State pensioners who retire in the future are in line to get more than £17,000 per year in pension payments based on triple lock rises.

The triple lock is used to set the new State Pension rates for each tax year based on whichever is the highest out of three factors. These include the consumer price index (CPI) measure of inflation (measured for September in the previous year), average wage growth between May and July of the previous year, or 2.5%, whichever is highest. This year the State Pension was uprated by 4.1%, in line with average wage growth, giving pensioners up to £470 extra per year.

The UK government has committed to the triple lock for the entirety of this Parliament and if it remains in place beyond this, workers currently aged 51 are in line to get State Pension payments worth up to £17,774 by the time they retire at age 68.

The State Pension age is currently 66 but this is due to rise to 67 by 2028, with a further rise to 68 planned between 2044 and 2046. But the government could bring the age increase to 68 forward earlier than planned as part of a newly announced review into the State Pension age.

According to financial firm Rathbones, if the State Pension age rise to 68 is brought forward between 2039 and 2041 instead - five years ahead of schedule - then the full State Pension would be worth £17,774 per year by this point thanks to triple lock rises.

Currently, the full basic State Pension is worth £9,175.40 per year and the full new State Pension (which is what all future retirees will be eligible for) is worth £11,973 annually.

Rathbones said in its analysis: "Rathbones' calculations are based on the new full state pension of £230.25 per week (£11,973 annually) and assume 2% inflation per year thereafter - the Bank of England's target inflation rate.

"Under the state pension triple-lock guarantee (which guarantees at least a 2.5 % annual increase), those figures would rise to approximately £17,774 for workers aged 51, £17,340 for those aged 52 and £16,918 for those aged 53.

"However, questions have been raised over the long-term affordability of the triple lock - which guarantees that the state pension rises each year in line with either inflation, wage increases or 2.5% - with the Institute for Fiscal Studies recently warning it could cost up to £40 billion a year by 2050."

Work and Pensions Secretary Liz Kendall said last month that a long-term commitment to the triple lock is not in the scope of the resurrected Pensions Commission, but it will be kept in place until the end of the current Parliament.

According to the Office for Budget Responsibility (OBR), the cost of the policy is estimated to reach £15.5 billion by 2030, raising concerns it may need to be scrapped. The OBR said the triple lock, which was introduced in 2011, has already cost three times more than initially expected and suggested it was unaffordable in the long term.

But when asked if she thought it was impossible to maintain the triple lock guarantee given its cost and if she could guarantee it would be in Labour's next manifesto, Ms Kendall said: "The triple lock is out of scope of the commission. We've got a very clear commitment to that for the entirety of this Parliament. And what we're asking the commission to do is genuinely look medium to longer term, the middle of this century, and how the State Pension and second pensions work together."

The Pension Commission is being relaunched to explore why people aren't saving enough for retirement and to examine the pension system as a whole to determine what changes are needed. The government has warned that adults are not saving enough into private pensions for retirement and are estimated to be £800 worse off than today's retirees by 2050.

Charlotte Kennedy, Chartered Financial Planner at Rathbones, added: "While auto-enrolment has helped many build retirement savings with minimal friction, most savers remain far behind what is needed for a comfortable retirement.

"Efforts to bolster pension adequacy are welcome, but it's important that new measures address the complex barriers preventing people from saving enough. The self-employed must not be left out. For business owners, pensions often take a back seat to the demands of growing a business.

"Financial education is also essential. It remains a minor part of the curriculum, typically folded into maths or PSHE. This must change. The earlier young people learn how pensions work, the more likely they are to start saving early and feel empowered to make informed financial decisions."