State Pension pay: retirees set for inflation-busting hike in 2024

Pensioners are set for a £901 pay rise, but this will only arrive next April. We reveal all the help available for the many retired households struggling right now.

Retired households struggling with the cost of living crisis look set for a second bumper State Pension pay rise.

Following on from the record 10.1% increase rolled out in April, retirees are all but guaranteed a further 8.5%. 

This would take annual New State Pension pay from £10,600 to £11,501 and the Basic State Pension from £8,122 to £8,812.

Unfortunately, this is only due in April 2024, leaving many retirees facing a difficult seven months as sky-high living costs continue to eat into their income.

As Alice Guy, head of pensions and savings at Interactive Investor, explains: “The triple lock increase is great news for millions of pensioners, providing a lifeline to many poorer households.

"One in eight pensioners don’t have any income in addition to the State Pension and are completely dependent on the triple lock to help them cover their rising costs.

"Women are particularly likely to rely solely on the State Pension, especially if they are on their own, as many have taken time out from the workplace, which makes it harder to build up a workplace pension.

“It’s important to remember that, even with the triple lock, the UK State Pension is still one of the lowest in Europe.

"Many other countries have a State Pension system based on the amount you pay in, rather than a simple flat rate.

"That means UK pensioners are hugely reliant on workplace pensions to supplement their State Pension income. But not everyone has access to a workplace pension.

"Those who are long-term carers, disabled or simply self-employed often end up with the rough end of the lollipop when it comes to retirement incomes.”

Let’s take a closer look at what’s likely to happen to retiree incomes.

Inflation-busting pay rise in 2024

Assuming the triple lock remains in place, the State Pension will increase by the highest of CPI inflation in September, average earnings between May and June and 2.5%.

Given that wages have been rising sharply recently while inflation is finally falling back means it's the former that's almost certain to be the highest measure, explains Helen Morrissey, head of retirement analysis at Hargreaves Lansdown.

“We always thought inflation would be the key factor when it came to the triple lock, but soaring wages look set to outstrip it, with annual wage growth of 8.5%.

"This has the potential of delivering a bumper State Pension increase next year, with recipients of the full new State Pension receiving more than £221 per week from next April.

"Inflation has proved unpredictable and could rise again ahead of next month, but with it currently standing at 6.8% it would need to be a truly enormous rise to outstrip what we are seeing here."

Many more pensioners to face tax bills

One of the knock-on effects of rising State Pension pay is that more retirees will be hit with a surprise tax bill. 

At present, everyone gets a tax-free Personal Allowance, which the Government has frozen at £12,570 until at least 2028. 

With the State Pension expected to hit £11,501 next April, that means retirees will already see 92% of their allowance eaten up from this income alone.

Jason Hollands, managing director at wealth management firm Evelyn Partners, says future increases will also create a fiscal headache for Government.

“There is a notable policy showdown on the horizon between the triple lock and the Chancellor’s multi-year freeze on Personal Tax Allowances.

"Both Conservatives and Labour have pledged a commitment to the triple lock in their manifestos for the upcoming election.

"And the policy of the current Government is to keep the Personal Allowance frozen until at least April 2028 at £12,570, with no indication of an alternative policy from Labour.

“If this year’s triple lock determines an 8.5% rise in the State Pension, that will take the new flat rate payout to £11,501 in the 2024/25 tax year.

"In the subsequent three years, it will require triple lock increases of just a sliver greater than 3% to take the annual State Pension above the annual Personal Tax Allowance.

“That then presents a conundrum to the government of the time: create an administrative and political headache by taxing the State Pension, possibly at source – which would be massively unpopular among the more than 13 million people then expected to be of pension age - or make the headache go away by raising the Personal Tax Allowance for everyone."

What to do if you're retired and struggling financially

While any State Pension increase sounds promising, the reality is many of these households are already facing huge challenges right now – and, worryingly, there’s far more pain to come this year as inflation remains stubbornly above the Bank of England's 2% target despite the repeated, rapid and painful increases to the Base Rate of interest.

If you're retired and struggling to make ends meet, the first thing to do is make sure you're getting all the help you're entitled to.

The Government has announced a few schemes to help people manage during the cost of living crisis, which we've rounded up here. 

We've also put together this guide to the benefits and entitlements specifically aimed at older Brits.

Data shows many struggling pensioners are missing out on hundreds, if not thousands, of pounds each year so it's vital you take the time to look into what's available.

Finally, if you still need to boost your income but returning to work isn't an option, here are your options for raising funds in retirement.