Upward revision of earning figures gives Rachel Reeves ‘unwelcome’ extra £100m bill for state pension rise next year
Pensions & benefits Demographics Economy Impact
The ONS has this morning published revised figures for average earnings growth in the three months to July this year (compared with the three months to July last 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 old and new rates of the old and new state pension are shown below:
|
|
2024/25 (£ pw) |
2025/26 (£ pw) |
Change (£pw) |
2024/25 (£ pa) |
2025/26 (£ pa) |
Change (£ pa) |
|
Old basic pension |
£169.50 |
£176.45 |
+£6.95 |
£8,814 |
£9,175 |
+£361 |
|
New state pension |
£221.20 |
£230.30 |
+£9.10 |
£11,502 |
£11,975 |
+£473 |
As a result of the changes, the new state pension will be just under £12,000 per year, with the weekly rate rising £9.10 to £230.30.
In theory this will not be finalised until we have the CPI figure for the year to September, but unless CPI suddenly surges between August and September, it is the average earnings figure which is used in the triple lock formula.
Commenting, Steve Webb, partner at LCP said:
“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”.
