“Yesterday’s ONS average wage figure of 8.2% signifies some positive news for struggling UK workers and pensioners. However, if the trend continues into next month and earnings do end up boosting next year’s State Pension, even as inflation falls, there’s likely to be heightened debate around the long-term affordability of the triple lock – and by extension, the State Pension.
The State Pension currently accounts for around £124bn of government spending so if it rises by 8.2% from next April, that will take the cost to just over £134bn. It’s recently been reported that this would make it more expensive than the day to day budgets of the Department for Education, Home Office and Ministry of Defence combined**.
“Of course, there are a number of variables at play and forecasters haven’t ruled out the possibility of inflation rising slightly again before it falls. Whatever the outcome, the long-term consequences on the triple lock will depend on the duration of both high inflation and high average wage growth. While the Government put a pause on State Pension reform earlier this year, and are unlikely to review this in the short term, consistent upwards pressure from either angle could force the Government to reconsider.”
About the Triple Lock
The Triple Lock is designed to protect the UK State Pension from losing its value to inflation and is determined by the highest of:
• CPI in September of the previous year
• The increase in average earnings between May and July of the previous year
• 2.5%
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