UK state pension on track to rise 4% under triple lock, latest wage growth data shows – business live

State pension on track to rise 4% due to wage increases

Newsflash: UK wage growth has slowed… but pensioners on the new state pension should still be guaranteed an increase of around £460 next year.

The latest UK labour market statistics, just released, show that total pay (including bonuses) rose by 4% in the May-July quarter.

And under the UK’s triple-lock pension pledge, that indicates that the new state pension should also rise by 4% next year.

That would lift the new state pension – currently £221.20 per week – up to around £230 per week, an increase of almost £9 a week from next April.

On an annual basis, it would increase the new state pension from £11,502.40 per year to £11,962 per year, an increase of £460 a year.

The final decision on the state pension will be taken by the secretary of state for work and pensions, Liz Kendall, before October’s budget. But chancellor Rachel Reeves has already pledged the government’s backing of the triple lock until the end of this parliament.

Pay excluding bonuses grew by 5.1% in the year to May to July 2024; including bonuses it was up 4.0%, though this comparison is affected by last year’s NHS and civil service one-off payments.

Read Labour market overview ➡️ https://t.co/LADdyoefyv pic.twitter.com/So7ERyAv1Q

— Office for National Statistics (ONS) (@ONS) September 10, 2024

Key events

Economic inactitvity dips, but still a problem

The number of people classed as economically inactive has dropped, but remains near record levels.

There were 9.298m people neither in work nor looking for a job in May-July, a drop of 136,000 in the quarter.

That has pulled the inactivity rate down to 21.9%, from 22.2% last month.

Yesterday, Work and Pensions Secretary Liz Kendall held a meeting with labour market experts to discuss how to tackle economic inactivity – which the government calls ‘greatest employment challenge for a generation’.

Yael Selfin, chief economist at KPMG UK, fears the problem will not be solved fast:

“The high level of inactivity is expected to persist in the near term, as the number of long-term sick and the backlog in NHS waiting lists are likely to remain elevated. That could put pressure on the economy if demand recovers unexpectedly strongly.

UK unemployment rate drops

Today’s UK jobs report also shows that the unemployment rate has fallen to 4.1% for the May to July quarter.

That’s down from 4.2% in April-June.

During the quarter, unemployment fell by 74,000 people to 1.437 million.

And employment rose in the quarter – it’s up by 265,000 to 33.232 million, to 74.8% of the population.

Headline indicators for the UK labour market for May to July 2024 show:

Employment was 74.8%
Unemployment was 4.1%
Economic inactivity was 21.9%

— Office for National Statistics (ONS) (@ONS) September 10, 2024

Jamie Jenkins, Director of Policy at Royal London, says:

“With inflation having reduced, the ‘triple lock’ will return to wage growth as the highest measure, and this should drive a 4% increase to the State Pension from April 2025.

“The government has committed to retaining the triple lock for now, ensuring that the State Pension rises each year by the highest of average wages, inflation or 2.5%.

“Inflation drove an 8.5% increase in April 2024 and, although the 2025 increase will be lower, it still serves to ensure those in receipt of the State Pension get the best of three measures, keeping pace with wages this year, and exceeding inflation at its current level.

“However, recent data obtained by Royal London found that only half of the 3.5 million recipients of the new State Pension were paid the full weekly amount of £203.85 last year, due to gaps in their National Insurance record. Until April 2025, those who are entitled to the new State Pension may be able to fill in the gaps going back to 2006.

The BBC’s Faisal Islam has also calculated the likely increase in the state pension:

NEW

Latest average earnings data for 3 months to July – up 4% (including bonuses)… which points to a £461 rise in the full new state pension (for post 2016 retirees) to £11963 under the triple lock policy pic.twitter.com/hlWdLpy7rw

— Faisal Islam (@faisalislam) September 10, 2024

Basic pay (stripping out bonuses) rose by more than total pay in the last quarter.

The Office for National Statistics reports that average regular earnings (excluding bonuses) in Great Britain grew by 5.1% in May to July.

However, it’s the total pay increase (4%) which is usually used to set the triple lock.

State pension on track to rise 4% due to wage increases

Newsflash: UK wage growth has slowed… but pensioners on the new state pension should still be guaranteed an increase of around £460 next year.

The latest UK labour market statistics, just released, show that total pay (including bonuses) rose by 4% in the May-July quarter.

And under the UK’s triple-lock pension pledge, that indicates that the new state pension should also rise by 4% next year.

That would lift the new state pension – currently £221.20 per week – up to around £230 per week, an increase of almost £9 a week from next April.

On an annual basis, it would increase the new state pension from £11,502.40 per year to £11,962 per year, an increase of £460 a year.

Pay excluding bonuses grew by 5.1% in the year to May to July 2024; including bonuses it was up 4.0%, though this comparison is affected by last year’s NHS and civil service one-off payments.

Read Labour market overview ➡️ https://t.co/LADdyoefyv pic.twitter.com/So7ERyAv1Q

— Office for National Statistics (ONS) (@ONS) September 10, 2024

While the pensions triple-lock seems safe under Labour, Jon Greer, head of retirement policy at Quilter, fears that the sustainability of the triple lock in the long term is questionable.

Greer explains:

It remains a contentious issue in pension policy, with no government willing to make drastic changes due to the potential backlash from a core voter base. Given recent changes to winter fuel payments which spurred immediate calls for a rethink due to the number of people who will struggle to pay their bills this winter as a result, any alterations to the triple lock by Labour seem entirely remote and more so given Rachel Reeves’ recent confirmation that it would stick by the policy.

“The debate around the triple lock often intersects with discussions on the appropriate level of the state pension relative to mean full-time earnings. There is a need for a consensus on the state pension level and a fair mechanism to ensure its value is maintained over time. Without such an approach, each uprating of the state pension risks creating generational divides. A system more closely aligned with average earnings might be more cost-effective and better reflect the nation’s overall prosperity.

“While the anticipated uplift in the state pension is positive news for pensioners, it is essential to consider the broader implications and sustainability of the triple lock policy. The government’s pension review will latterly look at pensions adequacy which must consider both state and private provision. Perhaps the review will be the mechanism to start the journey for change that removes the politics from the triple lock.”

Introduction: UK wage growth to set pensions triple-lock increase

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

We’re about to get a new healthcheck on the UK jobs market, and learn by how much the state pension should increase by next year.

The latest labour market statistics, due at 7am, are expected to show the unemployment rate dropped to 4.1% in May-July, down from 4.2% a month ago.

But wage growth is also expected to have slowed; total pay (including bonuses) is expected to have risen by 4.1% in the quarter, down from 4.5%.

And that will have implications for pensioners.

Under the UK’s triple-lock system, the state pension should rise each year by either inflation (the previous September), average earnings (for May-July), or 2.5%.

Inflation is not expected to rise sharply again this year (it was last clocked at 2.2%), so it’s today’s earnings figures that will be crucial.

The new State Pension is £221.20 a week, or £11,502 per year.

So, if wages did indeed rise by 4.1% in May-July, that would lift the state pension by just over £9 per week to around £230 per week. In annual terms, that’s over £470 more, to £11,973 a year.

Labour pledged to maintain the triple lock in their election manifesto. And last night, chancellor Rachel Reeves told a meeting of the Parliamentary Labour Party:

“Tomorrow, we get data for earnings growth, which will inform the increase in the pension next year. We are protecting the triple lock, not just for this year, but for the duration of this Parliament.”

Reeves also faces a crunch vote on the government’s controversial plan to scrap the winter fuel allowance.