The UK state pension is on course for a 3.9 per cent increase next April, after official figures showed that average wages rose at the rate that is likely to determine the annual triple-lock uplift.
The Office for National Statistics said weekly earnings increased by 3.9 per cent between May and July. Under the triple lock, state pension payments rise each year by whichever is highest of inflation, average earnings growth or 2.5 per cent.
If the Labour government maintains the policy following next month’s Budget, pensioners could therefore receive a 3.9 per cent increase from April 2027.
The full new state pension would rise by about £9.40 a week, from £241.30 to approximately £250.70. That would take annual payments to roughly £13,000, an increase of about £490 compared with the current rate.
Heidi Karjalainen, an economist at the Institute for Fiscal Studies and an expert on pension policy, said the latest earnings figures made the increase the most likely outcome.
This is likely to be how much the state pension increases by next year, unless something very unusual happens with September consumer price index (CPI) inflation, which is currently expected to be below 3.9 per cent.
“This means the full new state pension is expected to reach £250.70 per week, or around £13,000 per year, in April 2027. Compared to this year that’s an increase of around £490 per year.”
The final rate is expected to be confirmed by Chancellor John Healey in his Budget statement on October 28.
The increase will add to an increasingly contentious debate over the cost of the triple lock, which has been credited with reducing pensioner poverty but criticised by economists and think tanks for increasing pressure on public finances.
Forecasts from the Office for Budget Responsibility indicate that the uprating mechanism could cost significantly more than would have been the case under alternative pension policies by the end of the decade.
MPs and think tanks have called for changes to the way state pensions are uprated, arguing that an alternative mechanism could reduce the government’s long-term spending commitments.
But pension policy groups have warned against abandoning the triple lock without providing retirees with a credible replacement.
Lily Megson-Harvey, policy director at My Pension Expert, said: “Many retirees are currently grappling with rising living costs and uncertainty about how long their savings need to last.
Scrapping the triple lock without a clear alternative risks undermining confidence in retirement planning when certainty is needed most.
People deserve confidence that the goalposts won’t keep moving as they approach retirement, giving them the certainty needed to plan for later life and make informed decisions about their financial future.
The Government must work with the industry to focus on long-term sustainability and fairness, ensuring that retirees are protected.
For Labour, the latest figures underline the political dilemma at the heart of the triple lock: maintaining a policy designed to protect pensioners while facing growing pressure to contain the cost of the benefits system.
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