Must-know money: state pension set to soar to £11,501

The state pension is set to soar to over £11,500 a year thanks to bumper wage growth in September – which dictates the level of the triple lock guarantee

The state pension will rise to around £11,501 a year next April thanks to record wage growth.

Pensioners are in line for another bumper increase thanks to the triple lock guarantee which dictates that the state pension should increase each year by the equivalent of inflation, wages or 2.5% – depending on which is highest.

The latest wage data from the Office for National Statistics (ONS) showed wages were rising by 8.5% including bonuses in the three months to July.

Steven Cameron, pensions director at Aegon comments: “Today’s official earnings growth figures mean state pensioners are on target for an inflation-busting 8.5% increase next April.

“With any breaking of the triple lock commitment vanishingly unlikely so close to a General Election, this should mean someone on the full new state pension of £10,600 a year will see their income increase by £901 to £11,501 or £221.17 a week. The government typically gives official confirmation around November.”

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As this is higher than the current rate of inflation then retirees will enjoy another bumper raise to their state pension benefit. It means the government will have to find an extra £2 billion to make the payments.

In 2022 pensioners got a 10.1% uplift thanks to rocketing inflation. The bumper rises in the state pension have increased criticism over the fairness of the triple lock, particularly in 2022 when working age people weren’t seeing such generous pay rises.

Cameron adds: “The triple lock has been on a wild ride in recent years due to the high level of volatility in the economy and the unpredictability of both inflation and earnings growth.

“Looking ahead, all eyes will be on party manifestos to see what commitments are made for the next five years, something Rishi Sunak refused to comment on last weekend.

“The huge popularity of the triple lock amongst pensioners is balanced by the huge cost of funding it, which is met by the current National Insurance contributions of today’s workers.

“All parties must find a way to balance the books. One fairer and less unpredictable option would be to move away from a year-on-year comparison of earnings, inflation and 2.5% to one which averages out across say three years.”

However the 8.5% hike is not guaranteed according to Cameron. The annual increase is typically taken from September data but the government has to confirm it officially still, which usually happens in November.

Photo by Anna Shvets