What is a triple lock pension? Your simple explanation to the new state pension changes

12 September 2023, 17:33 | Updated: 13 September 2023, 10:25

OAPs are guaranteed an annual pay rise thanks to the triple lock pension, but what is it and how does it work?

Millions of OAPs will be eligible for a financial boost next year as experts predict a welcome rise to the triple lock pension.

Employment figures released this month show wage growth is up by 8.5 per cent, despite a cost of living crisis, meaning the state pension is set for a bumper increase in April 2024.

• Listen on Global Player: Spencer & Vogue. Spencer Matthews and Vogue Williams let you know what they’re doing, thinking, and disagreeing on every week

Pension pots will rise by at least that amount, but it could be even more depending on inflation figures set to be announced in October.

But what is a triple lock pension? And how much more will pensioners actually get? Here's your easy guide to understanding the new changes.

What is a triple lock pension?

The triple lock pension, first introduced by the coalition back in 2010, is essentially a promise by the government to raise publicly funded pensions in line with the UK economy.

It is a guarantee from those in power that the basic state pension people receive in retirement rises each year.

The amount is dictated by whichever is the highest of these three measures:

• Earnings - the average wage growth between May and July (compared to the three months in the previous year)
• Inflation - the rising cost of living, using the Consumer Prices Index measure
• Percentage - A rate of 2.5%

So to simplify, pensions will rise in 2024 by whatever is the highest figure from the above factors.

• Standard first-class stamp prices rise to £1.25 from 2nd October – here's how to beat the hike
• Martin Lewis reveals best cards to use abroad

What is a triple lock pension worth?

Last year the triple lock pension was halted by the government due to an "irregular statistical spike" following the pandemic.

In April 2022, it was revealed there would be a double lock instead, which just focused on inflation and 2.5% – the wage element was taken out of the equation.

However, this year the triple lock was back in force and increased the pension value by the inflation figure due to it being the highest of the three factors.

The rate last September (when the measurement was taken from) came in at 10.1%, meaning this was how much pensions increased by in April this year.

That rate equated to a boost of £18.70 for each retired Brit, whose pension jumped from £185.15 to £203.85 each week in 2023.

Why is the triple lock pension rising?

State pensions for April 2024 under the triple lock are now set for another "substantial" rise.

According to the Office for National Statistics (ONS), which is used to form part of the calculation, the highest figure of the three measures so far is coming in at 8.5 per cent.

This figure came from the average growth in wages from May to July 2023, not inflation, which is still to be announced in October.

If 8.5 per cent remains the highest of the three factors, the new state pension will shoot up from £203.85 to £221.20 per week, while the full basic state pension will increase from £156.20 to £169.50 per week.

Annually, that's over £900 in fresh pension earnings, meaning OAPs will bank over £11,500 in total for the year.

• Martin Lewis' warning to drivers renewing their car insurance

Industry experts are predicting the earnings growth figure will stay at the top, which gives OAPs an indication of how much their pension will rise by.

Aegon pensions director Steven Cameron said the forecasted financial boost will "pack a positive punch for pensioners' purchasing power".

While AJ Bell head of retirement policy Tom Selby added: "Retirees are set to receive their second blockbuster state pension increase in a row as a result of the government’s ‘triple-lock’ policy.

"For those in receipt of the state pension, the protection provided by the triple-lock is extremely valuable."