The full new state pension is set to climb above £12,000 next year if wage growth figures released today are repeated next month.
The state pension increases each April in line with whichever is the highest out of wage growth, inflation or 2.5 per cent under the triple lock policy, something the Labour government has pledged to continue.
Annual wage growth, including bonuses, was 4.5 per cent for the April to June 2024 period, according to figures released on Tuesday morning.
Next month’s data, which covers the three months to July, is the specific figure used for the triple lock.
If today’s figure were repeated, the full new state pension would be boosted by around £517 per year.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown said: “Wage growth remains robust, so it’s highly likely that next month’s figure will be the one used to uprate state pension under the triple lock.
“This month’s figure comes in at 4.5 per cent – way down on last month’s 5.7 per cent, but it has been affected by the payment of one-off bonuses in the NHS last year.
“If the figure were to remain the same next month, then we could see the full new state pension get a boost of around £517 – taking it to approximately £12,019 per year.”
The new state pension is £221.20 per week – which over 52 weeks works out at £11,502.40 per year – although some people do get less than this.
Meanwhile, the basic state pension – for those who reached their state pension age before 6 April 2016 – is £169.50 per week, or £8,814 per year.
It would rise to around £9,210 per year, if it were increased by 4.5 per cent.
The uplift would mean that the full state pension remained below the threshold at which people start paying tax – at least for now.
Anyone earning above £12,570 must start paying 20 per cent income and with personal tax thresholds frozen until 2028, it is likely the state pension will rise above this level by then.
The Conservatives pledged to raise the personal allowance for pensioners in line with the triple lock in the run-up to the General Election in July, but Labour did not match this promise.
“A similar rise next year could see it surpass it. With these freezes in place until 2028, there’s every chance, we could see pensioners solely reliant on the state pension finding part of it is making its way to the taxman,” Ms Morrissey added.
Chancellor Rachel Reeves also announced in July that the winter fuel allowance will be axed for all except the poorest pensioners.
The change means the benefit, whose payments are worth up to £300 a year, is now targeted only at pensioners eligible for pension credit, among the lowest income households.
Steven Cameron, pensions director at Aegon, said: “This is expected to see around 10 million pensioners above the income threshold losing out on at least £200 this winter, with some facing larger losses.
“While next April’s state pension increase is likely to be higher than current inflation, any increase in ‘real’ terms will be significantly dented by the loss of the winter fuel allowance.”
How the triple lock is calculated
The triple lock ensures the state pension rises each April. It rises in line with the highest of the following:
- 2.5 per cent
- The consumer prices index (CPI) measure of inflation from the previous September
- Average earnings growth for the year running to the previous May to July