Pensioners anticipated to receive larger state pension increase than expected
Pensioners are set to receive a more substantial increase in their state pension next year than previously anticipated. This change comes after the Office for National Statistics (ONS) revised upwards the wage growth figure used to calculate the pension boost.
Key Revision in Wage Growth Figures
According to the latest data from the ONS, total wage growth, including bonuses, for the quarter ending in July has been adjusted to 4.8%, up from an earlier estimate of 4.7%. This figure plays a crucial role in determining the annual increase under the triple lock guarantee.
Understanding the Triple Lock Guarantee
- The state pension rises every April based on the highest of three factors:
- Total earnings growth from May to July of the previous year
- Consumer Prices Index (CPI) inflation in September of the previous year
- A minimum increase of 2.5%
Next week, the inflation figures for September will be released. The most recent CPI inflation rate recorded was 3.8% in August, which adds context to the anticipated pension increase.
Projected Increases for Pensioners
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, highlighted that the revised wage growth means higher payments for pensioners. Those receiving the full new state pension could see their weekly payout rise to £241.30, an increase from £241.05. Similarly, recipients of the full basic state pension would receive £184.90 instead of £184.75 weekly.
Potential Challenges Ahead
Many pensioners do not qualify for the full state pension, as the amount received depends on individual national insurance records. As Rachel Vahey, head of public policy at AJ Bell, noted, if September’s inflation rate remains below 4.8%, the new state pension is expected to exceed £12,000 annually starting in April 2026.
| Pension Type | Current Weekly Rate | Projected Weekly Rate |
|---|---|---|
| Full New State Pension | £241.05 | £241.30 |
| Full Basic State Pension | £184.75 | £184.90 |
This situation creates a significant dilemma for the Treasury. If the new state pension crosses the personal allowance threshold of £12,570 in April 2027, the Government may face increased pressure regarding the sustainability of the triple lock. The implications of altering the personal allowance or changing the triple lock could have substantial financial and political repercussions ahead of the next general election.
