In April 2020, the new state pension will increase by 3.9% to £175.20 a week – £9,110 a year. The old state pension, which is payable to anyone who reached state pension age before 6 April 2016, also increases by 3.9% to £134.25 a week. Other state pension benefits, such as additional state pension, will rise by 1.7%, in line with CPI inflation to last September. The higher increase for the two main pension benefits is the result of the ‘triple lock’, which means for 2020/21 both increase in line with earnings rather than prices or a 2.5% floor.
At £9,110 a year, the new state pension is nearly £3,400 below the personal allowance and even below the newly increased level at which individuals start to pay national insurance contributions.
The October 2012 introduction of pension automatic enrolment added a second tier of private pension provision, but minimum contributions are at modest levels and the self-employed are not included. If you want to enjoy your retirement, the message from the latest state pension increases is to make sure your plans are not over-reliant on the state provision.