The Office for National Statistics (ONS) has published revised figures for average earnings growth, crucial for state pension calculations.
- Previously estimated at 4.0%, the figure is now revised to 4.1%, impacting the ‘triple lock’ formula.
- The increase will add approximately £100 million to the state pension budget this year.
- Pensioners will benefit from a significant uplift, with increases of £361 and £473 for old and new pensions, respectively.
- The Chancellor faces added pressure due to higher costs and proximity to the tax-free allowance threshold.
The Office for National Statistics (ONS) has revealed new figures indicating a 4.1% growth in average earnings for the three months leading up to July. This data is pivotal as it feeds into the ‘triple lock’ formula determining annual state pension increases.
The previously perceived growth of 4.0% has been adjusted upwards, creating a potential £100 million addition to the state pension bill. The ‘triple lock’, established to secure pensioner income, mandates that the state pension rise each April by the highest of 2.5%, the inflation rate for September, or the average earnings figure from May to July.
Amid these changes, current projections suggest a significant increase in pension payments. The new state pension is poised to rise by £473 annually, bringing it to just under £12,000 per year. Meanwhile, those on the old basic pension can expect an annual increase of £361. In weekly terms, the new rate of the state pension will advance by £9.10, reaching £230.30.
Former pensions minister, Steve Webb, currently a partner at LCP, acknowledged the benefits this increase delivers to pensioners; however, he also highlighted the fiscal challenge for the Chancellor. Webb remarked that the new rate is nearing the £12,570 tax-free personal allowance, a development likely to exert additional pressure on tax allowance policies in subsequent years.
The adjustments announced by the ONS are set to benefit pensioners while simultaneously imposing fiscal challenges for future policy discussions.
