September’s inflation figure has confirmed earnings growth remains the highest of the triple lock measures, paving the way for a higher State Pension from April 2027.
The new State Pension is set to increase by 3.9% from April 2027, after Office for National Statistics figures confirmed September CPI inflation stood at 3.5%, below average earnings growth of 3.9%.
Under the triple lock, the State Pension rises by the highest of inflation, earnings growth or 2.5%. Based on the latest figures, the earnings element is expected to determine next year’s increase, taking the full new State Pension from £241.30 a week to £250.70 a week, while the full basic State Pension is expected to rise from £184.90 to £192.10 a week.
Jon Greer, head of retirement policy at Quilter, said: “The final piece of the puzzle has now fallen into place, with today’s 3.5% inflation figure confirming that the new State Pension will rise by 3.9% next April under the earnings element of the triple lock – or 0.4% higher than had it been tied to inflation. This will take the full new State Pension to £250.70 a week, or £13,036.40 a year from April 2027, putting an extra £488.80 into pensioners’ pockets annually.”
Andrew Tully, technical services director at Nucleus, noted that not all elements of the State Pension benefit from the same increase.
“Pensioners will welcome another sizeable State Pension increase next April, but the triple lock doesn’t tell the whole story. Not every part of the State Pension gets the same protection, with some elements only increasing by CPI.”
The increase also has implications for taxation. With the personal allowance remaining frozen at £12,570 until at least April 2031, the full new State Pension is expected to exceed the income tax personal allowance for the first time.
Greer said: “The government has committed to ensuring pensioners whose only income is the State Pension do not pay income tax, but we are still waiting for detail on exactly how that will work in practice which we understand will be confirmed in the Budget.”
The announcement comes as inflationary pressures continue to affect household finances.
Commenting on the latest inflation data, Kevin Brown, savings expert at Scottish Friendly, said: “The UK economy has so far this year stood strong in the face of rising energy costs and geopolitical tensions. Another rise in inflation today, however, suggests that hardiness could soon be put even further through its paces.”
He added: “The worry is that the longer the Middle East conflict continues, the greater the risk that elevated energy and fuel costs feed through into the price of other everyday goods and services, placing even more pressure on household budgets going into the winter.”
Looking ahead, both Tully and Greer pointed to wider questions around the future of the State Pension.
Tully said: “The bigger question is what happens next. The State Pension age review shouldn’t simply be a debate about when people retire. We need an honest conversation about the State Pension we want for the future, including how much it should provide, whether the triple lock remains sustainable, the stark differences in life expectancy across the UK, and how we support people who can’t keep working until State Pension age.”
Greer also highlighted the planned replacement of the triple lock from 2030 and the importance of clarity around future uprating arrangements.
“The commitment to maintain the State Pension’s value relative to earnings over time is welcome, but pensioners need certainty not only over future uprating policy, but also over how their retirement income will be taxed in the years ahead.”
