Chancellor George Osborne has said the basic state pension is to increase by £3.35 a week to £119.30 a week, while the new single tier state pension is to be set at £155.65.
Speaking today (25 November) on the Autumn Statement held in parliament he said: “As a result of our commitment to those who have worked hard, next year the state pension will rise by £3.35.
He added that this is the“biggest real terms increase to basic state pension in 15 years.”
Mr Osborne added the triple lock on the value of state pensions is to be maintained and that savings credit is to be frozen at its previous level.
Additionally, Mr Osborne said: “Over five million have already been auto-enrolled.”
He added that auto-enrolment contributions will increase to 5 per cent, then 8 per cent, then increases are to be aligned to tax years.
Richard Priestley, executive director of retirement income at Canada Life, said: “The move by the chancellor will protect the incomes of pensioners, helping cement the rapid income gains they have enjoyed of late.
“In the last 20 years, retired households have seen their incomes climb to record highs, up by 77 per cent in real terms.
“This has far outstripped growth seen by the rest of the population. The state pension alone makes up two fifths of a typical household’s income, so this latest move is a boost pensioners will certainly enjoy.
“For those generations coming along behind, the picture may not be so rosy as they face more of an uphill battle to fund retirement. Defined benefit pension schemes which provided a guaranteed income linked to salary will gradually disappear altogether.
“This means savers will have to take more responsibility for their own retirement, though the government is capping the amount they are allowed to build up in their pension funds.
“Prospective retirees must consider long-term saving early enough in their careers to ensure their standards of living match those of the current retired generation.”
ruth.gillbe@ft.com