State pension payments could increase 8.5 percent next year with the full new state pension rising to £240.05 a week.
Falling inflation and the economy returning to growth means the rise in average earnings metric of the triple lock could determine how much payments increase next April.
Chris Demetriou, co-founder of Archimedia Accounts, said: “Assuming earnings growth persists as the overriding standard, pensioners could see a sizable increase of 8.5 percent or so next year.
“However, sustaining such large rises over the long-run raises questions about affordability that will probably spur formal examination of the triple lock mechanism within the next few years.”
An 8.5 percent increase would mean the full basic state pension would go up from the current £169.50 a week to £183.95, an increase of just over £750 a year to £9,565.40.
The full new state pension would increase from £221.20 a week to £240.05 a week, a boost of just over £980 a year to £11,482.60.
But Mr Demetriou warned the situation is still unpredictable as to which element of the triple lock will be used to determine next April’s increase.
He said: “With inflation rates fluctuating in recent months, it is admittedly difficult to predict with certainty whether earnings growth or inflation will determine next year’s pension increase under the triple lock mechanism.
“A lot can change between now and when that calculation occurs later this year. That said, if I had to make an early call, I’d say earnings growth is primed to be the decisive metric based on where things stand at present.”
Turning to the topic of what could replace the triple lock, the expert said: “Some viable reforms that might be considered include a double lock system focused on inflation or earnings alone, or solely indexing state pensions to inflation via the CPI measure.
“Finding the right balance between maintaining the real value of pensions and fiscal prudence will be crucial. There remain more unknowns than certainties at this stage, but earnings are nudging ahead for now based on recent economic signs.”
Pensions minister Mel Stride was quizzed this week (May 22) about Government plans to scrap National Insurance and how this could affect the state pension.
There were concerns raised scrapping the tax could result in a £5 or £6 cut in the state pension, which would amount to £260 or £312 a year.
Mr Stride said: “The Chancellor and I, and other members of the Government, have an aspiration to abolish National Insurance through a determinate but long period of time.
“Decisions around how money is spent within Government are typically announced in the main at least, at fiscal events in the Spring and the Autumn.
“As you will know, they are underwritten in a scorecard by the OBR to check that all the numbers add up and are within the fiscal rules. That’s the way the system operates.”
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