Millions of State Pensioners could find out the annual uprating for the contributory benefit next week when the latest earnings growth figures will be published by the Office for National Statistics (ONS). The measure forms part of the Triple Lock policy which the Labour Government has pledged to keep for the next five years.
Under the Triple Lock, the New and Basic State Pensions increase each year in-line with whichever is the highest between the average annual earnings growth from May to July (published on September 10), September’s Consumer Price Index (CPI) inflation rate (published mid-Octboer), or 2.5 per cent. It’s important to be aware additional elements of the State Pension, including payments for those who have deferred claiming it, rise annually by the September CPI figure.
The latest ONS figures show average regular earnings growth is at 4.5 per cent (including bonuses) in the three months to June, while CPI is currently at 2.2 per cent.
Chancellor Rachel Reeves will confirm the State Pension and benefits uprating during the Autumn Budget on October 30, so the calculations below are estimates based on the current highest measure of the Triple Lock.
As Labour have pledged to honour the Triple Lock, next week’s ONS earnings growth figures could be the key multiplier more than 12 million State Pensioners should take note of.
The current earnings growth figure of 4.5 per cent could see the full New State Pension rise by nearly £10 per week from £221.20 to £231.15, and as the payment is usually made every four weeks this amounts to £924.60. This would give pensioners a monthly income boost of £39.80.
Similarly, the full Basic State Pension could rise by £7.60 per week from £169.50 to £177.15, or £708.60 every four-week payment period. This would give a monthly income boost of £30.40.
Given inflation is currently 2.2 per cent, pension experts agree it is likely wage data will be used for the uplift.
Steven Cameron, Pensions Director at Aegon, explains what today’s 4.5 per cent earnings growth figure could mean for next year’s State Pension Triple Lock after millions to lose out on Winter Fuel Payments.
He said: “While not yet certain, this gives the best indication yet of by how much the State Pension will increase next April under the Triple Lock, which the Labour Government has confirmed will remain in place. The lower increase announced last month is because of a one-off bonus paid to NHS staff last June which will also suppress the figure announced this month.
“The specific figure used for determining the Triple Lock is the year-on-year increase in earnings for the period ending May to July 2024, which will be published next week. Barring any big fluctuations when July’s earnings figures are added in, this suggests State Pensioners may receive around a 4.5 per cent increase.
“The June 2023 NHS one-off bonus will also affect the May to July 2024 calculation, which will be a disappointment to State Pensioners who might otherwise have received a higher increase.”
Commenting on the potential uprating impact on next year’s Winter Fuel Payments, which will now only be issued to pensioner on a low income in receipt of a means-tested benefit such as Pension Credit, Steven said: “While next April’s State Pension increase is likely to be higher than current inflation, any increase in ‘real’ terms will be significantly dented by the loss of the Winter Fuel Payments.
“An increase of 4.5 per cent would bring the full yearly new State Pension to £12,019 a year. This makes it increasingly likely that the State Pension could soon be above the threshold for paying income tax, which remains frozen at £12,570 until April 2028.
“If the State Pension rises by another 4.3 per cent in April 2026, those with no other income on top of their State Pension would be facing an income tax bill. While initially of a tiny amount, this would cause stress for State Pensioners and an administration challenge for HMRC to collect it.”
He added: “The Triple Lock may be safe for the next five years, but the Government is clearly looking for ways to balance the nations finances.”
The ONS will publish the next earnings growth figure on September 10. The Chancellor will confirm the State Pension annual uprating on October 30.