What will the State Pension be in the future?
The State Pension is an invaluable part of any retirement plan. For most people, it will be their biggest single source of income and very expensive (if not impossible) to reproduce any other way. This doesn’t mean that those surviving solely on a State Pension have it easy. The State Pension only provides only a baseline for retirement that will cover your basic needs and outgoings, nothing more. However, the payments received have been getting more generous, and that is because of the ‘Triple Lock’.
The Triple Lock is the promise that the State Pension will be increased each year by the highest of either inflation, wages or 2.5%. It guarantees that increases in the State Pension will never lag behind any of these measures.
It's difficult to know for certain what the State Pension will be if you are still many years from claiming it. But some simple modelling can show us what the payment will rise to if different assumed annual increases are applied.
Source: Fidelity International
The cost of paying a higher State Pension needs to be met by taxpayers. Our ageing population means that the cost is likely to rise even more quickly in the future as a higher proportion of the population reaches retirement age. With the State Pension likely to come under increasing pressure (although all the major political parties promised to keep the Triple Lock for this parliament), there is even more onus on individuals to fund their own retirement. Money paid into a pension normally benefits from tax-relief, while employees with access to company schemes can usually benefit from employer contributions made on their behalf - this is a valuable benefit and should be maximised where possible.
While you may not be able to control the future rises in the State Pension, having a full National Insurance (NI) contribution history (35 complete years) will ensure you get the maximum available. You can get an estimate of your State Pension at https://www.gov.uk/check-state-pension.
This article isn’t personal advice. If you’re not sure whether a course of action is right for you, ask for financial advice.
Past performance is not a guide to future performance, nor a reliable indicator of future results or performance. The value of investments, and the income or capital entitlement which may derive from them, if any, may go down as well as up and is not guaranteed; therefore investors may not get back the amount originally invested.
