"A slightly higher rate of increase is welcome for pensioners, though will be an unwelcome £100m extra cost for the Chancellor as she prepares her Budget."
- Steve Webb, partner at LCP and former pensions minister
The ONS has this morning published revised figures for average earnings growth in the three months to July this year.
This is the crucial number used in the ‘triple lock’ calculation. Last month the provisional estimate was 4.0% but today this has been revised to 4.1%. Just this extra 0.1% adds around £100m to the state pension bill under the triple lock formula.
The triple lock means that the state pension increases each April by the highest of 2.5%, September's inflation statistic, or average earnings between May and July.
In theory, this will not be finalised until the CPI figure for the year to September is published. However, unless CPI suddenly surges between August and September, it is the average earnings figure which is used in the triple lock formula.
As a result of the changes, the new state pension is set to increase by £473 a year and the old basic pension by £361.
The new state pension will be just under £12,000 per year, with the weekly rate rising by £9.10 to £230.30.
Steve Webb, partner at LCP and former pensions minister, commented: “A slightly higher rate of increase is welcome for pensioners, though will be an unwelcome £100m extra cost for the Chancellor as she prepares her Budget. The rate of the new state pension will now be close to £12,000 per year, very near to the £12,570 tax-free personal allowance. This is likely to put extra pressure on the Chancellor to take action on tax allowances in the coming years.”
