Steve Webb: New figures show state pension increase will be ‘slightly higher than expected’

New ONS figures show the state pension will rise by 4.8% next April, slightly higher than expected. Steve Webb says the increase keeps the state pension below the tax threshold for now but warns it could exceed it by 2027 if allowances remain unchanged.

New figures from ONS published today (14th October) have revised upward the crucial figure for average earnings growth in the year to May-July from 4.7% estimated a month ago to 4.8%.  As this figure is likely to exceed both inflation and the 2.5% floor of the ‘triple lock’ formula, this means that the state pension is set to rise by 4.8% next April.

The table below shows the rates this year and next of the old ‘basic’ state pension and the ‘new’ state pension, which are the two elements of the system covered by the triple lock.

For pensioners who receive ‘additional state pension’ (also known as SERPS or State Second Pension) on top of their basic pension, this additional element will be increased in line with the CPI figure for the year to September which has yet to be published.

The increase in the annual rate of the new state pension is around £10 higher than if the increase had been based on last month’s estimate of 4.7%.

Commenting, Steve Webb, partner at pension consultants LCP said:

“We can now be pretty certain that the new state pension and the basic state pension will rise by 4.8%.  This will keep the headline rate of the state pension below the income tax threshold for one more year, but it will go above the tax threshold in 2027 if allowances do not rise”.