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 are 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 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 a 10.1% increase 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.
April’s triple lock hike is based on consumer price inflation figure from the previous September, and earnings growth for the 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%.
The earnings figure is higher and therefore likely to apply when the 2025 increase is set.
Today saw the publication of official UK earnings figures for the three months from April to June, and it’s sharply down at 4.5%.
That’s a real blow, especially if it continues in July, which is the monthly figure used for the triple lock.
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.
Unfortunately, that doesn’t seem likely now.
Wage growth of 4.5% would lift the new state pension by just £517. So next April it’s on course to be £12,019.
That would leave millions on the new state pension getting £138 less than they hoped just a month ago. That’s equivalent to £11.50 a month in lost income.
Helen Morrissey, head of retirement analysis Hargreaves Lansdown, said wages fell because in June last year NHS workers got massive one-off bonuses.
As they’re not getting them this year, the wages 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 the winter fuel allowance.”
I’ve based all the figures here on somebody qualifying for the maximum new state pension. Not everybody who retired will get the same amount.
Someone will suffer a short form because they haven’t made enough national insurance (NI) contributions during their working lifetime, or claimed NI credits when not working.
Older pensioners who retired before April 6, 2016, on the new basic state pension will get even less. 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 are struggling for every penny.
We will know exactly how much the triple lock will give them next month, when the May to July wages figure is published, and the government makes an official decision.
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.
