From 6 April 2020, the State Pension, for those who reached their State Pension Age on or after 6 April 2016 will rise by 3.9% to £175.20 a week (£9,110.40 a year).
For those who reached their State Pension Age before 6 April 2016, they will see their Basic State Pension also increase by 3.9% to £134.25 a week (£6,981.00 a year). These individuals may also receive an additional pension from the State in respect of the State Second Pension (S2P), formerly called the State Earnings Related Pension Scheme (SERPS). The amount they receive will depend on their earnings before reaching their State Pension Age. Some members may receive some of this additional State Pension as part of the pension they receive from any company pension arrangement they have.
How is the increase to State Pensions calculated?
Increases to the New State Pension and Basic State Pension are calculated as the greater of:
- the rate of inflation (measured by the increase in the Retail Prices Index) or
- the average increase earnings (measured by the National Average Earnings Index) or
- a minimum increase of 2.5%.
This is often referred to as the ‘triple lock’. This year the National Average Earning index produced the highest of the three potential increases with an increase of 3.9%.
For those members who reached their State Pension Age before 6 April 2016, the increase to any additional State Pension they receive, above the Basic State Pension, is calculated using the rate of inflation only. Therefore the increase to this part of their State Pension will be 1.7%.
Click here to open the page on the HMRC website which explains State Pensions in more detail.