How much the State Pension pays now and what it'll be worth in 2020

Those who receive the State Pension look set for a healthy rise from April 2020. Read on to see how much the New and Basic State Pensions will be worth, and how much they currently pay.

The amount the State Pension will pay from April 2020 looks set to increase at its fastest rate since 2012.

Analysis by pension firm Aegon shows the State Pension will likely be worth 4% more from next year.

If correct it means retirees on the New State Pension will receive £175.35 a week, while those on the Basic State Pension will get a weekly income of £134.35.

The rest of this article explains more about how the State Pension is calculated: for those who want to learn more about all aspects of retirement finances, head over to our comprehensive guide to pensions.

How much the New State Pension pays is down to the triple lock

At present, the rate at which the State Pension increases is calculated by what's known as the triple lock system.

In short, this is the greater of annual price inflation as measured by the earnings growth, inflation as determined by the Consumer Price Index (CPI), or 2.5%.

Earnings growth is calculated from the year to July, which we already know stands at 4%. 

Inflation's figures are garnered from September's CPI figure, which will only be revealed in mid-October.

But given that the rate stood at just 1.7% in the previous month, it's highly unlikely that inflation will rocket beyond 4% in the space of a month, meaning wage growth is by far the most likely figure to be applied to the 2020/2021 State Pension pay increases.

So let's look at how State Pension pay could rise by, based on that figure.

How much the New State Pension will pay from April

As a result of our convoluted and, some would say unfair welfare system, there are two different State Pensions.

Those pensioners entitled to the full New State Pension would see their weekly payments increase by £6.75 from £168.60 this tax year (2019/20) to £175.35 from April 2020.

The change means they would receive an extra £351 by the end of next tax year (up from £221 this tax year), with total annual income boosted from £8,767.20 to £9,118.20.

Put your retirement plans in your own hands with a Self Invested Personal Pension (SIPP)

How much the old Basic State Pension will pay from 20/21

Those that receive the full old Basic State Pension would see their payments increase by a smaller £5.15 a week, rising from £129.20 this year to £134.35 in 2020/21.

The 4% increase would mean that, annually, these pensioners will get a total of £6,986.20 in 2020/21 compared to £6,718.40 this tax year – a rise of £267 in pure cash terms.

Past State Pension changes

Here’s how the State Pension has been uprated over the previous eight years.

 

How State Pension was uprated

Which part of the triple lock kicked in?

April 2012

5.2%

Inflation (CPI)

April 2013

2.5%

Guaranteed minimum

April 2014

2.7%

Inflation (CPI)

April 2015

2.5%

Guaranteed minimum

April 2016

2.9%

Average earnings

April 2017

2.5%

Guaranteed minimum

April 2018 3% Inflation
April 2019 2.6% Wage growth

Put your retirement plans in your own hands with a Self Invested Personal Pension (SIPP)

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Find out how much you need to save for retirement

loveMONEY election manifesto: scrap the State Pension triple lock

 

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