The state pension is set to be higher than expected for millions of pensioners as a result of revised earnings figures.
The Office for National Statistics (ONS) revealed on Tuesday that average wage growth in the three months to July was 4.1 per cent, up from its previous estimate of 4 per cent.
This is the crucial figure that is used in the state pension triple lock calculation and means pensioners are likely to see an even bigger boost to their pots in April next year.
Under the triple lock, the state pension increases every April by whatever is the highest – inflation, earnings growth or 2.5 per cent – and this year the earnings growth figure is expected to be the highest of the three.
Inflation figures will be released tomorrow, which, if higher would be used instead. However, it is expected to be below two per cent and so not used.
As a result of the revised wage figures, and provided they will be used to uprate the triple lock, it means those on the new state pension will get £473 more a year as of next April, compared to the previous estimate of £460 a year.
It means the weekly rate will increase from £221.20 to £230.30, a total increase from £11,502 to £11,975 a year.
For those on the basic state pension, the increase will be from £169.50 to £176.45 – £6.95 more a week and an extra £361 a year.
This will be an annual hike from £8,814 to £9,175.
Although good news for pensioners, it will cost the Government an estimated extra £100m.
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”.
Chancellor Rachel Reeves said yesterday that the state pension will rise by around £450 a year, adding she would announce the exact level of the state pension at the Budget on 30 October.
She insisted that the uplift would more than compensate for the loss of the winter fuel payment – worth up to £300 a year – suffered by most pensioners.