The UK state pension is set to rise by about £460 a year from April 2025, according to the latest average wage growth figures.
The Office for National Statistics announced on Tuesday that average growth in earnings in July was 4%.
Under the triple lock guarantee the state pension will rise by the highest of inflation, average earnings or 2.5%. With the September inflation rate – the inflation figure used to calculate the triple lock – expected to be lower than wage growth, analysts are widely expecting next year’s pension to rise 4% in line with average earnings.
It will mean the full new state pension will increase from £221.20 per week to £230.05, or £11,963 a year. The old state pension will increase from £169.50 per week to £176.30 per week, or £9,168 per year.
Rachel Vahey, head of public policy at AJ Bell, said: “UK pensioners are on track to see a sizeable inflation-beating increase to their state pension next year. The government’s commitment to the triple lock pledge means it’s likely the earnings growth figure of 4% will be used to determine the rise in the state pension next year. And at a time when inflation has fallen back closer to the Bank of England’s targeted rate of 2%, this will give a welcome boost to pensioners’ income in real terms.”
Looking ahead, Vahey said Labour’s decision to stick with the triple lock promise may help redeem the government in the eyes of UK pensioners but warned that its long term sustainability is under question.
Vahey said: “The government is coming under more intensive pressure to ‘u-turn’ on its controversial decision to axe the Winter Fuel Payment and although the increase to the state pension should help meet next year’s bills, it doesn’t help those who will be living close to the edge of their means this winter.
“The triple lock guarantee has worked well in the favour of pensioners over the recent past, boosting the state pension by 28% over the last four years. But with the state pension edging ever closer to the frozen personal allowance of £12,570, and the concept of universal payment coming under increasing scrutiny, the government will have to take the bull by the horns at some point to address who should get the state pension, at what age, and how much.”
Jon Greer, head of retirement policy at Quilter, said: “With the government preparing for difficult decisions, many will be worried this policy might be next on Rachel Reeves’ chopping block. Following the controversy over limiting winter fuel payments to low-income pensioners, it seems unlikely that the triple lock will be altered in the short term.
“Yet, its sustainability remains a key issue over the longer-term, as it provides a boost to pension incomes, relative to earnings, only when the economy is struggling. This coupled with the pressure of a larger pensioner population will put a strain on the public finances; balancing pensioner welfare with other needs is becoming more challenging, and reform appears inevitable eventually. However, this politically charged area might be one difficult decision too many for Labour this early in their tenure.”
Greer said the government faces a balancing act between ensuring the pension remains fair and adequate without widening the generational divide. In addition, with the income tax thresholds frozen, some pensioners may find themselves in the position of paying a portion of their pension back in income tax.
Greer added: “As the government’s upcoming pension review examines the adequacy of both state and private pensions, this could be the moment for a balanced, long-term strategy that aims to get cross-party support. A consensus on the appropriate level of the state pension and a fair mechanism for maintaining its value over time is essential to prevent annual increases from becoming political flashpoints.
“While the 4% increase is positive for pensioners, the broader conversation on the triple lock’s future must continue. The upcoming review may be key to finding a sustainable path forward that depoliticises the process and ensures fairness across generations.”
