Pensioners are on track to receive a 4.7% increase in their state pension next April, latest wages data suggests.
Figures from the Office for National Statistics showed average wage growth including bonuses reached 4.7% in the three months to July.
Under the triple lock guarantee, the State Pension will rise by the highest of average earnings growth, September’s inflation figure or 2.5%. With the Bank of England forecasting in August that UK inflation would peak at 4%, it appears likely that the earnings figure will be used for the annual increase.
This means the full ‘new’ State Pension will increase from £11,973 per year to £12,534.60 per year in April 2026, putting it above the £12,000 mark for the first time. The ‘old’ State Pension will increase from £9,175.40 per year to £9,607 per year.
David Brooks, head of policy at Broadstone, said: “Today’s earnings figures point to another substantial triple-lock increase next April.
“The good news for millions of pensioners is that they will receive hundreds of pounds more income every year at a time when many still face persistent cost-of-living pressures and depend heavily on the State Pension as their main income.”
However, pension experts warned that the rising figure brings pensioners perilously close to the personal allowance threshold. Assuming the personal allowance remains frozen at £12,570 per year, the full State Pension will exceed this by 2027/28 if it increases by 2.5% in April 2027.
Rachel Vahey, head of public policy at AJ Bell, said: “This poses a significant conundrum for Rachel Reeves and the Treasury. If, as is likely, the triple lock sees the State Pension increase above the personal allowance in 2027, then the Government will come under increasing pressure to make a decision regarding either the personal allowance or whether it can sustain the triple lock as it has promised at least to the end of this Parliament.
“Removing the freeze on the personal allowance would come at significant cost to the Treasury at a time when the chancellor’s fiscal headroom is already strained at best, while an overhaul of the triple lock would come with huge political risk before the next general election.”
The rising cost of funding this benefit will also raise questions around the sustainability of the triple-lock guarantee long term.
Brooks said: “Debate over the future of the triple lock, means testing or alternative fundings via the introduction of a national insurance contribution of some kind is likely to intensify.
“Increasingly the debate appears to be framed as triple lock or nothing when it comes to increasing the State Pension but most would consider it fair that the State Pension should increase. The debate around whether the increase is dictated by an earnings link or an inflation link should be a priority.”
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “The increase will add further pressure on the Government who are battling an already burgeoning state pension bill.
“The government has committed to keeping the triple lock in place for the rest of this Parliament but longer term its future could be uncertain.”
Morrissey said that other options include an extension of the current timetable with dates for state pension age running into the late 60s and beyond.
However, she pointed out that consideration also needs to be given to the issue of healthy life expectancy and the reality that while we may be living longer this does not necessarily mean that everyone can continue to keep working.
In July, the Government revived the Pensions Commission as part of a long-term plan to address the pension under-saving crisis. As the Commission promises to look at the balance between all types of pensions, it could also mean a review of the State Pension at the same time as the Government launches its formal review of the State Pension age.
Vahey said: “The State Pension age is due to rise to 68 in the mid-2040s. It’s entirely possible – if not likely – this latest State Pension age review will advocate bringing forward that increase to the late 2030s to save future governments’ money.
“Pensions minister Torsten Bell recently ruled out scrapping the triple lock guarantee, but as the State Pension grows ever closer to the frozen personal allowance threshold it could be that the Government is finally forced to address the question of how much the State Pension should really offer, at what age, and how it can increase payments sustainably each year.”
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