The State Pension looks set to increase by 3% from April 2018, marking the highest annual increase since 2012.

The pension rise is linked to inflation as measured by the Consumer Price Index (CPI), which jumped from 2.9% in August to 3% in September.

September’s inflation data is particularly important to many households as it is used to adjust various benefits and tax thresholds for the following tax year, including the State Pension.

The Chancellor, Philip Hammond, will need to confirm the increase in his Budget on 22 November, but we thought we would look at exactly how much pensioners may get based on the 3% increase.

[Read more: 6 mistakes that could reduce your state pension]

How much will State Pension pay in 2018/19?

Pensioners entitled to the new State Pension will see their payments increase from £159.55 per week to £164.34 a week if, as expected, the 3% rise is confirmed.

The change means they will be nearly £250 better off by the end of the tax year, with total annual income boosted from £8,296.60 to £8,545.50.

Those that receive the basic State Pension will also see their weekly payments increase from £122.30 to £125.97.

The 3% increase means that annually these pensioners get a total of £6,550.39 in 2018/19 up from £6,359.60 in 2017/18 – which means they will be £190.79 better off over the course of the year.

Of course, this is in pure cash terms: the eroding effects of inflation could mean you will be no richer – or even poorer – in real terms, depending on your spending habits.

How State Pensions are uprated

The State Pension is protected by a ‘triple lock’ promise, which was introduced in 2011.

This means it is guaranteed to rise each year by the higher of September CPI inflation, average wage growth or 2.5%.

Here’s how the State Pension has been 'uprated' over the last six years.


State Pension was uprating

Which part of the triple lock kicked in?

April 2011


Inflation (RPI)*

April 2012


Inflation (CPI)

April 2013


Guaranteed minimum

April 2014


Inflation (CPI)

April 2015


Guaranteed minimum

April 2016


Average earnings

April 2017


Guaranteed minimum

*Change of index from RPI to CPI for the inflation part of triple lock was delayed for the State Pension until April 2012 (see 2.33 of the 2010 Budget book if you want the full details)

With inflation higher than earnings and the arbitrary 2.5% guarantee, this will be the figure used to determine the rise in the State Pension next year.