State pension on track to rise 4% due to wage increases
Newsflash: UK wage growth has slowed… but pensioners on the new state pension should still be guaranteed an increase of around £460 next year.
The latest UK labour market statistics, just released, show that total pay (including bonuses) rose by 4% in the May-July quarter.
And under the UK’s triple-lock pension pledge, that indicates that the new state pension should also rise by 4% next year.
That would lift the new state pension – currently £221.20 per week – up to around £230 per week, an increase of almost £9 a week.
On an annual basis, it would increase the new state pension from £11,502.40 per year to £11,962 per year, an increase of £460 a year.
The final decision on the state pension will be taken by the secretary of state for work and pensions, Liz Kendall, before October’s budget. But chancellor Rachel Reeves has already pledged the government’s backing of the triple lock until the end of this parliament.
Pay excluding bonuses grew by 5.1% in the year to May to July 2024; including bonuses it was up 4.0%, though this comparison is affected by last year’s NHS and civil service one-off payments.
Read Labour market overview ➡️ https://t.co/LADdyoefyv pic.twitter.com/So7ERyAv1Q
— Office for National Statistics (ONS) (@ONS) September 10, 2024
Key events
Basic pay (stripping out bonuses) rose by more than total pay in the last quarter.
The Office for National Statistics reports that average regular earnings (excluding bonuses) in Great Britain grew by 5.1% in May to July.
However, it’s the total pay increase (4%) which is usually used to set the triple lock.
State pension on track to rise 4% due to wage increases
Newsflash: UK wage growth has slowed… but pensioners on the new state pension should still be guaranteed an increase of around £460 next year.
The latest UK labour market statistics, just released, show that total pay (including bonuses) rose by 4% in the May-July quarter.
And under the UK’s triple-lock pension pledge, that indicates that the new state pension should also rise by 4% next year.
That would lift the new state pension – currently £221.20 per week – up to around £230 per week, an increase of almost £9 a week.
On an annual basis, it would increase the new state pension from £11,502.40 per year to £11,962 per year, an increase of £460 a year.
The final decision on the state pension will be taken by the secretary of state for work and pensions, Liz Kendall, before October’s budget. But chancellor Rachel Reeves has already pledged the government’s backing of the triple lock until the end of this parliament.
Pay excluding bonuses grew by 5.1% in the year to May to July 2024; including bonuses it was up 4.0%, though this comparison is affected by last year’s NHS and civil service one-off payments.
Read Labour market overview ➡️ https://t.co/LADdyoefyv pic.twitter.com/So7ERyAv1Q
— Office for National Statistics (ONS) (@ONS) September 10, 2024
While the pensions triple-lock seems safe under Labour, Jon Greer, head of retirement policy at Quilter, fears that the sustainability of the triple lock in the long term is questionable.
Greer explains:
It remains a contentious issue in pension policy, with no government willing to make drastic changes due to the potential backlash from a core voter base. Given recent changes to winter fuel payments which spurred immediate calls for a rethink due to the number of people who will struggle to pay their bills this winter as a result, any alterations to the triple lock by Labour seem entirely remote and more so given Rachel Reeves’ recent confirmation that it would stick by the policy.
“The debate around the triple lock often intersects with discussions on the appropriate level of the state pension relative to mean full-time earnings. There is a need for a consensus on the state pension level and a fair mechanism to ensure its value is maintained over time. Without such an approach, each uprating of the state pension risks creating generational divides. A system more closely aligned with average earnings might be more cost-effective and better reflect the nation’s overall prosperity.
“While the anticipated uplift in the state pension is positive news for pensioners, it is essential to consider the broader implications and sustainability of the triple lock policy. The government’s pension review will latterly look at pensions adequacy which must consider both state and private provision. Perhaps the review will be the mechanism to start the journey for change that removes the politics from the triple lock.”
Introduction: UK wage growth to set pensions triple-lock increase
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
We’re about to get a new healthcheck on the UK jobs market, and learn by how much the state pension should increase by next year.
The latest labour market statistics, due at 7am, are expected to show the unemployment rate dropped to 4.1% in May-July, down from 4.2% a month ago.
But wage growth is also expected to have slowed; total pay (including bonuses) is expected to have risen by 4.1% in the quarter, down from 4.5%.
And that will have implications for pensioners.
Under the UK’s triple-lock system, the state pension should rise each year by either inflation (the previous September), average earnings (for May-July), or 2.5%.
Inflation is not expected to rise sharply again this year (it was last clocked at 2.2%), so it’s today’s earnings figures that will be crucial.
The new State Pension is £221.20 a week, or £11,502 per year.
So, if wages did indeed rise by 4.1% in May-July, that would lift the state pension by just over £9 per week to around £230 per week. In annual terms, that’s over £470 more, to £11,973 a year.
Labour pledged to maintain the triple lock in their election manifesto. And last night, chancellor Rachel Reeves told a meeting of the Parliamentary Labour Party:
“Tomorrow, we get data for earnings growth, which will inform the increase in the pension next year. We are protecting the triple lock, not just for this year, but for the duration of this Parliament.”
Reeves also faces a crunch vote on the government’s controversial plan to scrap the winter fuel allowance.
The agenda
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7am BST: UK labour market statistics
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8am BST: Kantar grocery sales figures 8am
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9.30am BST: Mortgage lending statistics from the FCA
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1.55pm BST: US Redbook index of retail sales