The full new state pension is likely to rise by £488 next April to £13,036.40 a year, after figures published today by the Office for National Statistics showed average wage growth of 3.9 per cent.
Under the triple lock, the state pension rises each year by the highest of average wage growth, inflation or 2.5 per cent. Average earnings growth including bonuses slowed to 3.9 per cent in the three months from May to July, according to the ONS.
The rise will not be confirmed until September inflation figures are released next month. Inflation currently stands at 2.9 per cent and is not expected to exceed the wages figure.
What pensioners are likely to receive
If the 3.9 per cent increase is applied, the flat-rate new state pension, paid to those who reached state pension age after April 2016, would be £250.70 a week, or £13,036.40 a year. That would be an increase of £488.
The old basic state pension, for those who reached state pension age before April 2016, would be £192.10 a week, or £9,989.20 a year, an increase of £374.40.
Almost 13 million people receive the state pension in the UK.
A rise of 3.9 per cent would take the flat-rate state pension above the personal allowance of £12,570, making it liable for income tax. The Labour government has previously pledged that pensioners who rely solely on the state pension would not be required to complete a tax return, nor be chased to pay.
Scrutiny of the triple lock
The triple lock was introduced in 2012 in response to pensioner poverty rates. It has come under scrutiny in recent months as the number of pensioners is expected to rise in the coming years, making the policy more expensive. The House of Commons Library has set out how the triple lock works and the debate over its future cost.
Ruth Curtice, chief executive of the Resolution Foundation, told the BBC today that the triple lock was creating a “ratchet effect” where “pensioners’ living standards grow even faster than just a typical worker”.
Curtice told the Today programme: “It’s not affordable in any situation to simply have pensions rising faster than earnings because earnings are a big part of the tax base.
“Pensioners have seen living standards grow three times more than typical workers over the last 20 years.”
Liam McLaughlin, an associate economist at the National Institute of Economic and Social Research, said the increase in the state pension added “fiscal pressure at a time when the triple lock is already under scrutiny”.
The policy has been debated for years, and Business Matters has previously examined what the state pension triple lock means for retirement planning.
Labour market figures
The earnings data was published alongside the ONS’s wider labour market overview for September.
The unemployment rate was unchanged at 4.9 per cent, but the number of vacancies and the number of employees on payrolls both fell in recent months, according to the ONS.
The unemployment rate was also 4.9 per cent in the ONS release in June, when total pay growth including bonuses was 4.4 per cent. In May, Business Matters reported long-term unemployment at a 10-year high.
Total earnings growth of 3.9 per cent was down from 4.2 per cent in the previous three-month period, according to the ONS.
Jamie Young
Jamie Young is Senior Reporter at Business Matters, covering SME finance, employment law and Westminster policy since 2016. He has reported on every Budget and Autumn Statement since 2018, helped make sense of the 'covid era' and the bounce-back loan scheme from launch through the fraud investigations, and broke the magazine's coverage of the 2024 late-payment reforms. He joined Business Matters straight from completing his BA in Administration from Exeter University and is NCTJ-qualified. Reach him at jyoung@cbmeg.co.uk
