Official figures released yesterday showed that total pay in the three months to July rose by 8.5 per cent outstripping inflation at 5.9 per cent.
Under the government’s triple lock mechanism the latest earning figures should be used to calculate next year’s increase in the state pension, which is supposed to rise in line with whichever is highest out of average wage growth, inflation or 2.5 per cent.
But government sources said the latest earnings figures did not accurately represent real terms wage growth in the economy because they included one-off payments to NHS staff and other public sector workers as part of pay deals agreed earlier this year. They argued that if bonus payments were stripped out of the figures, underlying pay rose by about 7.8 per cent rather than the headline rate of 8.5 per cent.
As a result the rate of the triple lock pension rise, as well as that of benefits, is now being “reviewed” by Mel Stride, the work and pensions secretary, before an announcement at next month’s autumn statement.
The Institute for Fiscal Studies has said that an 8.5 per cent rise in the full state pension would cost the government £2 billion more than has been budgeted for in 2024–25. Implementing the higher increase would mean a full basic state pension going from £156.20 per week to £169.50.
A full new state pension — typically offered to those who reached state pension age since April 2016 — would rise from £203.85 per week to £221.20, an extra £902 a year.
IMO, the “slight” reduction is inevitable, given the savings benefit but how it is achieved will be “interesting” … 