State pension triple lock explained as annual review nears
The Secretary of State will conduct his statutory annual review of benefits and state pensions in the autumn
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State pensioners could see another significant boost to their state pension via the triple lock next year.
Economists have predicted that, in data published next week, earnings growth will be higher than price inflation for the first time in 14 months, the Times reports. If earnings growth exceeds inflation in upcoming months, it could mean an inflation-beating pay rise for state pension recipients next year.
Aegon pensions director Steven Cameron said: “If earnings growth does exceed 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.”
The data which is used to determine the amount the state pension would rise under the triple lock will be released in the next few months.
The DWP will publish state pension rates following the annual review
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What is the state pension triple lock?
The triple lock is a government commitment to uprate the basic and new state pension by the highest of earnings, prices or 2.5 per cent.
It’s intended to prevent the state pension from losing value in real terms and guarantee it will increase annually in line with inflation.
The earnings growth figure used is the year-on-year increase for the period May to July, which will be published mid-September.
The third metric of the triple lock, the year-on-year inflation increase to September, will be published in mid-October.
While it’s not yet known what this year’s increase could look like, Mr Cameron said both inflation and the earnings growth figure are “currently well above 2.5 per cent".
The Consumer Prices Index (CPI) increased by 7.9 per cent in the 12 months to June 2023, falling slightly from 8.7 per cent in May.
Bank of England forecasts in May revealed inflation is expected to drop slightly from 8.7 per cent to seven per cent by September.
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Pensioners could see another 'bumper' state pension hike next year
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Alice Guy, head of pensions and savings at interactive investor, said it could mean pensioners are due another “bumper” state pension hike next year.
A Department for Work and Pensions spokesperson said: “As is the usual process, the Secretary of State will conduct his statutory annual review of benefits and state pensions in the autumn, using the most recent prices and earnings indices available.”
Particularly high inflation last year meant the state pension increased by 10.1 per cent in April 2023.
In April 2022, Government suspended the earning component because of furlough distortions. Under the temporary double lock, pensioners got an increase based on the previous September’s inflation figure of 3.1 per cent.