by Hopes of a whopping £655 pay rise in April 2025 appear to have been dashed by figures released today, with them now likely to receive £11.50 less per month than expected.
Under the triple lock, the UK state pension increases each year by inflation, earnings or 2.5% (whichever is higher).
Labour leader Keir Starmer has promised to maintain the hugely popular top-up mechanism for the full five-year term of the current legislature.
The triple lock has come under criticism in recent years because it gave state pensioners two huge increases in a row.
In April 2023, they received 10.1 percent adjusted for inflation, while in April this year they received 8.5 percent in line with earnings growth.
This helped millions of people survive the cost of living crisis and softened the blow of former Prime Minister Rishi Sunak’s controversial move to suspend the triple lockdown in 2021.
The triple annual increase is based on the consumer price inflation rate in September of the previous year and wage growth over three months from May to July.
Inflation is currently running at around 2%, while wages rose much faster, at 5.7%, in the three months to May this year.
Since the merit number is higher, it will likely be used to determine the increase for 2025.
Earnings figures for the three months to June were released today, and they fell sharply by 4.5%.
This is a real blow, especially if it continues like this in July.
Today, the new full state pension is a maximum of £11,502 per year. A 5.7 per cent increase would have raised the amount by £655 to £12,157 per year.
However, an income growth of 4.5 percent would only increase the new state pension by £517 to £12,019.
This would mean that millions of people receiving a new state pension would receive £138 less than they had hoped for – a loss of income of £11.50 a month.
Helen Morrissey, head of pension analysis at Hargreaves Lansdown, said NHS staff received massive one-off bonuses in June last year.
Since they don’t receive these benefits in June, wage growth for that month has fallen. Bad luck for pensioners.
Morrissey said pensioners would still welcome the increase, but warned: “Many are still reeling from the news that their winter heating allowances will be cut. So it will not be quite the increase they were hoping for.”
Steven Cameron, pensions director at Aegon, said it was a second blow to pensioners following Labour Chancellor Rachel Reeves’ decision to scrap winter heating allowances.
“This will be a disappointment for state pensioners who might otherwise have received a higher increase.”
In practice, pensioners would not even earn £517 more, warned Cameron. “Any real increase will be significantly reduced by the loss of heating allowances in winter.”
This is a double blow for pensioners.
I have prepared all these figures based on people who are entitled to the full new State Pension. Not every pensioner will receive the maximum amount.
Some are struggling with a deficit because they do not pay enough social security contributions.
Many older pensioners who retired before 6 April 2016 and are on the new basic state pension will receive significantly lower pensions. I will cover this topic in another article.
Today’s lower growth figures are a double blow for pensioners at a time when many are fighting for every penny.
We will find out exactly how much the triple lock will cost them next month when the wage figures for July are published.
The only positive is that a more moderate increase would somewhat defuse the controversy surrounding the triple lock, as it would potentially make it more sustainable in the long term.
