A rise in inflation means that from next year retirees will benefit from a 4 per cent boost to their state pension as well as a £20,000 increase to the lifetime allowance.
Data published this morning showed that UK inflation (Consumer Price Index) was 1.7 per cent in September 2019, unchanged from August.
But September’s inflation figure is of particular importance to savers as a number of state benefits are uprated annually in line with this data, including the state pension.
Under current rules, the state pension is increased by the ‘triple lock’ which is the highest of earnings growth, price inflation or 2.5 per cent a year.
As the price inflation figure has fallen to 1.7 per cent, down from 2.4 per cent in September 2018, and the earnings growth figure used is that to July, which was 4 per cent, pensioners are on track to receive a 4 per cent increase in their state pension payments from April.
This means the full new state pension will see an increase from £168.60 to £175.35 per week and the full old basic state pension will see a rise from £129.20 to £134.35 per week.
The lifetime allowance also increases every April by the CPI price inflation rate to September of the previous year.
This means the lifetime allowance is expected to increase from £1,055,000 to around £1,075,000 in April 2020 for defined contribution pensions, subject to government confirmation and rounding to the nearest £5,000.
For defined benefit pensions, the lifetime allowance is set as an annual pension and this is expected to increase from £52,750 to £53.750, according to analysis from Aegon.
Steven Cameron, pensions director at Aegon, said: “Although any increase is welcome, these increases are in line with price not earnings inflation.
“With wage growth remaining much higher than inflation, this means in earnings terms the lifetime allowance is becoming less and less generous, leaving more individuals, and not just particularly high earners, at serious risk of breaching the limit.”