“One group with a keen interest in how this unfolds are state pensioners. Under the triple lock, state pensions are increased annually in April by the highest of earnings growth, price inflation or 2.5%. The earnings growth figure used is the year-on-year increase for the period May to July, published mid-September. The inflation figure used is the year-on-year increase till September, published in mid-October. Both are currently well above 2.5%. The latest earnings growth figure is 8.2%, now above the latest inflation figure of 7.9%. If the earnings growth figure announced next month stays at this level, this guarantees state pensioners 8.2% next April, even if inflation continues to fall.
“The triple lock has come under intense scrutiny in recent years because of the volatility in earnings growth during the pandemic, and more recently because of sky-rocketing inflation, which reached double figures late in 2022 and has remained stubbornly high. In April 2022, the Government suspended the earnings component because of furlough distortions, meaning state pensioners received an increase based on the previous September’s inflation of 3.1% which was around half the level inflation had risen to by April 2022. In April 2023, particularly high inflation meant state pensioners received a double digit increase of 10.1%.
“If earnings growth remains above price inflation in the coming months, state pensioners may be winners, particularly as they are less likely to be affected by rocketing mortgage costs and could also be benefitting from higher interest rates on cash savings.”
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