Hopes that they would get a bumper £655 pay rise in April 2025 appear to have been dashed by new figures published today. Now they’re likely to get £11.50 a month less than anticipated.
Under the triple lock, the UK state pension rises each year by inflation, earnings or 2.5%, whichever is highest.
Labour leader Keir Starmer has pledged to maintain the hugely popular uplift mechanism for the entire five-year life of the current Parliament.
The triple lock has come under fire in recent years, as it has handed state pensioners two bumper increases in a row.
In April 2023, they received 10.1% based on inflation, while this April they got 8.5%, in line with earnings growth.
This helped millions survive the cost-of-living crisis and softened the blow from former PM Rishi Sunak’s controversial move to suspend the triple lock in 2021.
Each year’s triple lock hike is based on the consumer price inflation figure from September the year before, and earnings growth over three months from May to July.
Currently, inflation is around 2%, while in the three months to May this year, earnings rose much faster at 5.7%.
As the earnings figure is higher it’s likely to apply when the 2025 increase is set.
Today saw the publication of earnings figures for the three months to June, and it’s sharply down at 4.5%.
That’s a real blow, especially if it continues in July.
Today, the full new state pension pays a maximum of £11,502 a year. An increase by 5.7% would have lifted it by £655 to £12,157 a year.
However, earnings growth of 4.5% would increase the new state pension by just £517 to £12,019.
That would leave millions on the new state pension getting £138 less than they had hoped. That’s equivalent to £11.50 a month in lost income.
Helen Morrissey, head of retirement analysis Hargreaves Lansdown, said in June last year NHS workers got massive one-off bonuses.
As they’re not getting them this June, the month wage growth figure fell. Bad luck for pensioners.
Morrissey said pensioners will still welcome the rise but warned: “With many still reeling from the news that their winter fuel payment is to be taken away, it won’t be quite the boost they hoped for.”
Aegon pensions director Steven Cameron said this was a second blow for pensioners following Labour chancellor Rachel’s Reeves decision to axe the winter fuel payment.
“This will be a disappointment to state pensioners who might otherwise have received a higher increase.”
In practice, pensioners won’t even be £517 better off, Cameron warned. “Any increase in ‘real’ terms will be significantly dented by the loss of their winter fuel allowance.”
So that’s a double blow for pensioners.
I’ve based all these figures on somebody qualifying for the full new state pension. Not everybody who retired will get the maximum amount.
Some face a shortfall because they don’t have enough qualifying national insurance (NI) contributions.
Many older pensioners who retired before April 6, 2016, on the new basic state pension get much smaller pensions. I’ll be tackling that issue in another article.
Today’s lower growth figure is a double blow for pensioners at a time when many struggle for every penny.
We will know exactly how much the triple lock will grant them next month, when the July wages figure is published.
The only positive is that a more modest increase will remove some of the controversy over the triple lock, by potentially making it more sustainable in the longer run.