Will the State Pension Increase in 2024?

The state pension is going up by 8.5%

Those entitled to the full level of the new state pension will get £221.20 a week, up from £203.85 this year. This change means that pensioners will be £902 better off by the end of the 2024-25 tax year, taking their total state pension income to £11,502.40.  

State pensioners who qualified before April 2016 and receive the basic state pension will see their weekly payments rise from £156.20 to £169.50, giving a total annual income of £8,814.

How much state pension you get depends on your National Insurance record so that you could get less than the headline rates.

Pension credit is also going up.

If you’re on a low income, you might be eligible for pension credit, a means-tested benefit to boost your state pension.

In 2023-24, if you are over state pension age (66) and your income is less than £201.05 a week, pension credit will top you up to that amount. For a couple, the combined income figure is £306.85.

Like the state pension, the amount of pension credit you get will be going up from April.

For 2024-25, pension credit will top you up by an extra £17.10 per week (from £201.05 to £218.15). For couples, the increase is £26.10 per week (from £306.85 to £332.95).

This top-up is known as ‘guarantee credit’. There is another part of pension credit known as ‘savings credit.’ You may be eligible for one or both.

Savings credit is payable to pensioners who reached state pension age before 6 April 2016. 

If you’re eligible, you’ll get up to £15.94 a week (£17.84 if you have a partner). This amount is rising by 6.7% (CPI inflation in September 2023), so from April, you’ll get up to £17.01 a week (£19.04 if you have a partner).

The Lifetime allowance will be scrapped.

The lifetime allowance (LTA) is a cap on the amount you can save into your pension without incurring a tax charge. It’s being removed altogether from April 2024. 

Previously, you could save as much as you wanted into a pension, but if it exceeded the total amount (the lifetime allowance), you could be hit with a hefty tax charge. In 2022-23, the lifetime allowance was £1.073m.

While this was a high threshold, the LTA had been particularly impacting doctors and consultants working in the NHS who were quitting the workforce when their pensions neared or reached the threshold to avoid being hit with a big tax bill.

Although the lifetime allowance is being abolished, there will still be a cap (of £268,275) on the tax-free lump sum you can take from your pension; in some cases, this might be higher if you had previously protected your lifetime allowance at a higher rate. It is important to check with an FCA-regulated financial adviser if you are unsure.

Pot For Life

Each time someone changes jobs, they’re enrolled in a new scheme chosen by that employer. This can lead to people accumulating many small pension pots, which can be challenging to keep track of.

As part of his Autumn Statement in November, the Chancellor unveiled plans to address this problem by introducing a ‘pot for life’, into which workers could ask their employer to pay contributions.  It could take years for this to become a reality.

In the meantime, you can make it easier to keep tabs on your pensions by combining them into one scheme.  If you require any further information or help and guidance from an FCA-regulated financial adviser, please don’t hesitate to contact us for further details and a no-cost initial meeting with one of us.