The state pension is to rise by 2.5% with retirees set to receive up to £200 a year extra next year.
From April 2017, pensioners eligible for the full flat-rate state pension – men born on or after 6 April 1951 and women born on or after 6 April 1953 – will get £159.55/week, up from £155.65. That's an extra £3.90/week or £202.80/year.
Those who get the old basic state pension – men born on or before 5 April 1951 and women born on or before 5 April 1953 – will see payments go up to £122.30/week from £119.30 – an extra £3/week or £156/year.
The increase is promised to pensioners through the so-called 'triple lock', ushered in by former Chancellor George Osborne six years ago.
The triple lock says the state pension will go up by 2.5%, Consumer Prices Index (CPI) inflation or earnings growth – whichever is highest. This year, earnings growth of 2.5% matched the 2.5% promise, triggering the payout rise.
The triple-lock promise is due to continue to the end of this Parliament – 2020 – but is under review because of concerns about long-term cost.
Pensioners who are paid the old basic state pension but who also get an additional state pension payout known as 'Serps' (or the State Second Pension) will see this separate amount rise in value, but only by 1% – in line with CPI inflation.
Those younger pensioners paid the new state pension but who also qualify for an extra payment on top of the current £155.65 will also see this rise by only 1%.