Nocturnal 
The state pension looks set to break through £13,000 a year for the first time, after fresh wage growth figures pointed to a 3.9% rise under the triple lock next April.
According to Office for National Statistics data released this week, average earnings growth including bonuses slowed to 3.9% in the three months to July, down from 4.1% the previous month. That figure is expected to be used to set next year’s state pension increase, as reported by the BBC, the Guardian and Business Matters.
If confirmed, the full new state pension would rise by £488 a year, from £762.60 a week… sorry, from £13,036.40 a year, up from around £12,548 currently. Weekly, that works out at £250.70, according to Business Matters.
The older basic state pension, paid to those who reached state pension age before April 2016, would rise by £374.40 to £9,989.20 a year, or £192.10 a week.
What is the triple lock?
Under the triple lock policy, the state pension rises each April in line with whichever is highest out of average wage growth, inflation, or 2.5%. The 3.9% wage growth figure is likely to be used unless September’s inflation data, due next month, comes in higher.
Inflation currently stands at 2.9%, according to Business Matters, and isn’t expected to overtake wage growth, making an earnings-led rise “the most likely outcome,” as one pensions expert put it in the Guardian’s live coverage.
Almost 13 million people in the UK receive the state pension, meaning the increase would be one of the most widely felt financial changes of next year.
Pushed above the tax threshold
A 3.9% rise would take the flat-rate state pension above the personal allowance of £12,570 for the first time, meaning it would technically become liable for income tax.
Rachel Vahey, head of public policy at AJ Bell, said pensioners were on course for “just shy of £500 extra” next year, though she cautioned the figure wasn’t yet locked in.
The government, via minister Torsten Bell, has pledged that pensioners whose only income is the state pension won’t be taxed simply because the payment rises above the personal allowance. Claire Trott, head of advice at St James’s Place, warned that pensioners with other income, such as private pensions or savings, “could find more of that income subject to tax.”
Affordability debate reignited
The prospect of another above-inflation rise has reignited arguments over whether the triple lock is sustainable long term. Ruth Curtice, chief executive of the Resolution Foundation, told the BBC the policy was creating a “ratchet effect”, adding: “Pensioners have seen living standards grow three times more than typical workers over the last 20 years.”
Jonathan Cribb of the Institute for Fiscal Studies said the rising cost “builds upon the last” each year, calling the long-run bill “substantial but very uncertain.” State pension spending already stands at £154bn this year, with forecasts suggesting it could rise by a further £600m annually by 2029-30.
Not everyone sees it as a problem. Jon Greer, head of retirement policy at Quilter, said the rise “reflects the success of the triple lock in strengthening the value of the state pension over time.”
Labour has committed to keeping the triple lock until 2029. For now, the figure isn’t locked in — it will only be formally confirmed once September’s inflation data is published next month.
