Millions of pensioners are expected to see their weekly payments rise in April, after the latest wage figures confirmed that the state pension is on course for a 4.7% increase.
Triple Lock Drives Increase
Under the government’s “triple lock” system, the state pension is uprated each April by whichever is highest of inflation, average earnings growth, or 2.5%. The Office for National Statistics (ONS) reported on Tuesday that total pay, including bonuses, grew by 4.7% in the three months to July. That figure is now expected to be used for next year’s rise.
The increase will mark the third consecutive year in which earnings growth, rather than inflation, has set the level of the state pension.
What Pensioners Can Expect
If confirmed, the new flat-rate state pension — paid to those reaching retirement age after April 2016 — will rise to £241.05 a week, equal to £12,534.60 a year. That represents an increase of £561.60.
For those on the older basic state pension, the weekly payment is set to rise to £184.75, or £9,607 annually — a £431.60 uplift.
Not all pensioners receive the full amount, as payments depend on years of National Insurance contributions.
Concern Over Tax Thresholds
The rise, however, has sharpened concerns about tax thresholds that have been frozen until 2028. The personal allowance, currently £12,570, is now edging close to the new state pension rate.
Sir Steve Webb, former pensions minister and now a partner at consultancy LCP, warned that more pensioners will be drawn into paying tax.
“Someone with no income other than the new state pension is set to become a taxpayer in April 2027,” he said. “Nearly three quarters of pensioners already pay income tax, and this trend will only accelerate.”
Linda, a retired hairdresser from Wokingham, told the BBC she was worried that the increase would simply be offset by tax liabilities. “They’re giving it on one hand and taking it on the other,” she said. “If they raised the tax threshold, that would make a huge difference.”
Labour Market Signals
The ONS data also showed signs of a cooling jobs market. Regular pay growth, excluding bonuses, slowed to 4.8% in the three months to July, the weakest rate since spring 2022.
Public sector pay rose by 5.6%, compared with 4.7% in the private sector. Meanwhile, the unemployment rate edged up to 4.7%, its highest since May 2021. Vacancies fell by 10,000 over the quarter, and the number of payrolled employees dropped by 8,000 in August.
Liz McKeown, ONS director of economic statistics, said wage growth remained “strong by historic standards” but acknowledged the trend was softening. KPMG chief economist Yael Selfin predicted further declines, with growth likely to fall below 4% by the end of the year.
Debate Over the Triple Lock
Introduced in 2011, the triple lock was designed to prevent pensions from falling behind either inflation or wages. But its long-term cost has become a source of political debate.
In July, the Office for Budget Responsibility said the guarantee would cost three times more by the end of the decade than originally forecast.
Despite the strain on public finances, ministers have pledged to retain the policy for the rest of this parliament. Work and Pensions Secretary Pat McFadden said the government was committed to “honouring the triple lock,” estimating that pensioners would see their annual income rise by around £1,900 by the next general election.
The Bigger Picture
The state pension is currently the second-largest line item in the UK budget, after health spending. With nearly 13 million people receiving payments, the growing cost of the triple lock will remain central to debates about public finances in the years ahead.
