The state pension is set to receive an above-inflation increase of 2.6 per cent, in line with average earnings growth, as part of the triple lock policy.
It comes as the Office for National Statistics revealed the September inflation figures of 2.4 per cent.
The publication of the inflation rate means that the government now has all the information that it needs to set pension and benefit rates for April 2019 and, under the terms of the pensions ‘triple lock’ policy, pensions have to be increased by the highest of one of three criteria.
They either have to be increased in line with the growth in earnings, which was 2.6 per cent in August 2018; by the growth in prices, measured by the CPI, which is 2.4 per cent; or a minimum of 2.5 per cent.
With today’s fall in price inflation, the pension will rise in line with the growth in average earnings (2.6 per cent), taking the new state pension from £164.35 per week in 2017/18 to £168.65 for 2018/19. The old basic state pension will also see an increase from £125.95 to £129.25.
However, pensioners on the old state pension will see an increase in other elements of their pension, such as in the state earnings-related pension scheme (SERPS) in line with the increase in the CPI.
The main rate of the guarantee credit for the poorest pensioners is linked by law to the growth in average earnings, also resulting in an increase of 2.6 per cent.
Commenting, AJ Bell senior analyst Tom Selby said: “Today’s figures will provide a welcome income boost to millions of people currently in receipt of the state pension. Those who get the flat-rate amount will see their annual payment increase by over £220 in April next year, a smaller increase compared to last year but still not to be sniffed at. With inflation returning to the economy, the value of protection against rising prices is not to be underestimated.
“In the context of the triple-lock, it’s worth noting the guarantee will cost the government nothing compared to the earnings and inflation ‘double-lock’ some have proposed. It is only in a low inflation, low earnings environment that the promise begins to bite."