State pension shortfall to hit millions as older Britons to miss out on £2,800 savings boost

Older Britons, particularly those on the basic state pension, are at risk of missing out on thousands of pounds in state pension payments despite the annual triple lock increase.

The triple lock ensures that state pensions rise each year by the highest of inflation, wage growth, or 2.5%. This year, wage growth of 4.1% will be used to calculate the increase, taking effect in April. However, the pension system is divided into two schemes, creating a significant gap between those on the old basic state pension and those on the new state pension.

Those who retired before April 6, 2016, receive the basic state pension, while those who retired after that date receive the new state pension. From April 2025, the basic state pension will increase from £169.50 to £176.45 per week, amounting to £4,411.25 annually. In contrast, the new state pension will rise from £221.20 to £230.25 per week, totaling £11,973 per year. This means those on the basic state pension could miss out on up to £7,561.75 annually compared to those on the new scheme.

The disparity has sparked concerns, especially for female pensioners born before 1953 and male pensioners born before 1951, who are more likely to be on the basic state pension. To bridge the gap, Pension Credit is available for those with low incomes, topping up weekly income to around £218. From April, Pension Credit will increase to £227.10 for a single person and £346.60 for a couple. A single person claiming Pension Credit would receive £11,809.20 annually, just £163.80 less than someone on the full new state pension.

Experts argue that the system needs reform to address the inequality between the two pension schemes. Steven Cameron, pensions director at Aegon, suggested adapting the triple lock formula to ensure pensioners receive inflation increases as a minimum, with additional uplifts if wage growth exceeds inflation over a three-year average. This would provide more stability and fairness. He also called for a review of the 2.5% minimum in the triple lock, given the current focus on reducing inflation to 2%.

While the government has committed to maintaining the triple lock for this parliament, its long-term future remains uncertain. Cameron urged politicians to seek a sustainable solution that is fair across generations, rather than using the issue for political point-scoring. The growing gap between the two pension schemes highlights the need for a more equitable approach to ensure all pensioners, regardless of when they retired, can enjoy financial security in their later years.