Aegon: Today’s earnings growth figures should deliver inflation busting increase to state pension

by | Sep 12, 2023

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Aegon’s Steven Cameron has discussed why today’s earnings growth figures may mean state pension triple lock will deliver inflation busting 8.5% increase next April. 

He said: “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.

“The triple lock currently guarantees that the state pension will rise each April by the highest of three measures: earnings growth (including bonuses) as announced in September, inflation announced in October, or 2.5%. With inflation falling from its peak of 10.1% at the beginning of 2023 to 6.8% in July, it is looking increasingly likely that today’s earnings growth figure of 8.5% will be the deciding factor in next April’s state pension increase. 

“After this April’s double digit 10.1% increase, it means over two years the state pension will have increased by almost a fifth (19.5%). Total average earnings for workers by contrast have increased by 14.5% over two years. 


“If the government delivers on its pledge to halve inflation to 5% by the end of the year, this will pack a positive punch for pensioners’ purchasing power. However, pensioners may spend a higher proportion of their income on the likes of food, which continues to experience stubbornly high price hikes. 

“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.” 

Relevant factors for uprating of State Pension under the ‘triple lock’ 
Date Effective CPI to September Earnings Growth to July Guarantee 2.5% Minimum Used for Benefit Uprating 
Apr-24 TBC 8.5% 2.5% Very likely to be earnings (8.5%) 
Apr-23 10.1% 5.5% 2.5% CPI (10.1%) 
Apr-22 3.1% N/A – Suspended 2.5% CPI (3.1%) 
Apr-21 0.5% -1.0% 2.5% GM (2.5%) 
Apr-20 1.7% 3.9% 2.5% Earnings (3.9%) 
Apr-19 2.4% 2.6% 2.5% Earnings (2.6%) 
Apr-18 3.0% 2.2% 2.5% CPI (3.0%) 
Apr-17 1.0% 2.4% 2.5% GM (2.5%) 
Apr-16 -0.1% 2.9% 2.5% Earnings (2.9%) 
Apr-15 1.2% 0.6% 2.5% GM (2.5%) 
Apr-14 2.7% 1.2% 2.5% CPI (2.7%) 
Apr-13 2.2% 1.6% 2.5% GM (2.5%) 
Apr-12 5.2% 2.8% 2.5% RPI (5.2%) 

 Aegon analysis of House of Commons library State Pension Uprating. Source: 2022 Benefits Uprating, p.12 


About the State Pensions triple lock: 

The triple lock was introduced by the collation government and first used to uprate the state pension in April 2011. The April 2011 increase used RPI as the measure for inflation, to ensure the basic state pension was in line with the previous uprating rules. In its current form, since April 2012/13 the triple lock has ensured that the State Pension increases by the highest of the increase in earnings, price inflation (as measured by the CPI) or 2.5%, although the government suspended the earnings-element of the triple lock for the 2022/23 financial year because furlough during the pandemic had distorted earnings growth figures. 

 Full State Pension 
April 2021 £9,339.20 
April 2022 £9,627.80 
April 2023 £10,600.20 
April 2024 (assuming 8.5% increase) £11,501.20 

* April 22-24 growth = 19.5%


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