State pension and lifetime allowance increases for 2020/21
Many rates and benefits increase each April based on the annual rate of Consumer Price Index (CPI) to the previous September. This rate has now been announced for September 2019 as 1.7%.
The new state pension and the basic state pension element of the old state pension are currently subject to increases under the ‘triple lock’ guarantee meaning that the annual increase rate is the higher of this CPI figure, the average earnings increase in the three months to July and 2.5%. As the average earnings increase was the highest of these figures, at 3.9%, this will be the figure used for these state pension increases next April (the additional state pension under the old system and any protected payment under the new system increase with CPI rather than under the triple lock so these elements will increase by 1.7% in April).
As a result, the basic state pension under the old system will increase by £5.05 a week to £134.25, while the new state pension will increase by £6.60 a week to £175.20.
The lifetime allowance for pension savings, if rounded up to the next £1,000 would increase to £1,073,000 from April or if rounded up to the next £5,000 would increase to £1,075,000.
The Regulations state that the previous Lifetime Allowance, after applying the CPI increase, will (if not already a multiple of £100), be rounded up to the nearest £100. However, last year the government chose to round up to a higher figure, i.e applying the CPI rate from September 2018 of 2.4% to the 2018/19 LTA of £1.03m gave a figure of £1,054,720 so rounding up to the next £100 would have given an LTA of £1,054,800 but the government actually increased the LTA to £1,055,000 (which is both a rounding up to the next £1,000 and the next £5,000).
The exact figure is expected to be confirmed as part of the Budget on 6 November and a statutory instrument passed to bring it into force.