State pension savers warned 2024 won’t see big increase like in 2023 | Personal Finance | Finance

Those on the state pension will be breathing a sigh of relief after the Government confirmed they will enjoy a 10.1 percent boost in their incomes in 2023. This is because the triple lock has been brought back after being suspended in 2022. The policy guarantees a state pension rise in line with the highest of average earnings, inflation or 2.5 percent.

The boost for pensioners will cost the Government £11billlion. Chancellor Jeremy Hunt said in the House of Commons on Thursday: “To support the poorest pensioners, I have decided to increase the pension credit by 10.1 percent which is worth up to £1,470 for a couple and £960 for a single pensioner in our most vulnerable households.

“But the cost-of-living crisis is harming all pensioners so because we have taken difficult decisions elsewhere in this statement, I can today announce that we will fulfill our pledge to the country to protect the pensions triple lock.”

However, an expert tells Express.co.uk that, with inflation likely to come down by next year, 2024 will see a much smaller increase in the state pension.

Professor Richard Murphy, founder of Tax Research, said: “What most people don’t understand about inflation is that it is simply a comparison of prices this year to prices this time last year. This year’s prices are high because of Putin’s war in Ukraine. Therefore, we are comparing prices before and after that war.

After the 10.1 percent increase, new state pension payments will rise from £185.15 per week to £203.85 while basic state pension weekly payments will go up from £141.85 per week to £156.20.

While this will come as welcome news to millions in the UK, it could also see many more people dragged into the tax net. Sir Steve Webb, a former pensions minister, warned that frozen income tax thresholds combined with pension increases will drag half-a-million people into paying extra duties.

He told the Daily Record: said: “Freezing tax thresholds is a stealthy way of raising the tax at the best of times, but at a time of soaring inflation, freezing thresholds has a profound effect.

“During this Parliament, we have already seen over a million extra pensioners dragged into the tax net, and next April’s increase is likely to add at least half a million more.

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“If the Chancellor is looking for ways to cut taxes and ease the cost of living pressures on those on modest incomes, he could do worse than review the long-term freeze of income tax allowances.”

The Budget this week comes in the context of a bleak economic outlook for the UK. The Bank of England warned earlier this month that the country faces its longest recession in 100 years as it increased interest rates 0.75 percent to three percent.

The Bank’s governor, Andrew Bailey, added: “We can’t make promises about future interest rates, but based on where we stand today, we think the bank rate will have to go up by less than currently priced in financial markets.”

Inflation is also predicted by the Bank to peak at 11 percent in 2023.