The Office for National Statistics (ONS) reported on 12 September that average earnings growth, including bonuses, was 8.5% over the May to July period1. According to Which?, this is the highest regular annual growth rate since comparable records began in 20011. Excluding bonuses, the figure was 7.8%1.
The earnings figure matters because the state pension is uprated each year by whichever is highest of September's inflation, earnings growth from May to July, or 2.5%, under the arrangement known as the triple lock1. September's CPI inflation was 6.7%, the same figure recorded for August, according to ONS figures released on 18 October1. Which? reported that this makes it unlikely inflation will be used to boost the state pension in April, and that soaring wage growth will be the figure used in the uprating calculation for 2024-25, though it noted speculation the government could use the lower figure that excludes bonuses1.
In 2023-24, the full level of the new state pension is £203.85 a week, or £10,600.20 a year, and the basic state pension, paid to those who reached state pension age before April 2016, pays £156.20 a week or £8,122.40 a year1. Which? estimated the effect of each wage figure:
| Figure used | Full new state pension | Basic state pension |
|---|---|---|
| 8.5% (including bonuses) | £221.20 a week, £11,502.40 a year, a rise of over £902 | £169.50 a week, £8,814 a year, a rise of over £691 |
| 7.8% (excluding bonuses) | £219.75 a week, £11,427 a year, an increase of £826.80 | £168.40 a week, £8,756.80 a year, a boost of £634.40 |
Source: Which?1
Which? noted that in the 2022-23 tax year the triple lock was reduced to a "double lock" to address a quirk in wage growth following the Covid-19 pandemic, and that in August Rishi Sunak told ITV the government was committed to its policy on the triple lock, but that after the record earnings figures were revealed on 12 September there were rumours the government would tinker with the calculation again1.
Why it matters for households
The uprating takes effect from April 2024 and applies to people receiving the state pension1. The full new state pension requires at least 35 qualifying years of National Insurance contributions, and at least 10 years' worth to get anything at all; those who reached state pension age before April 2016 need 30 years of contributions for the full basic state pension1. State pension age is currently 66 for women and men, and is due to increase in the coming years1.
Which? also set out the tax position. The personal tax threshold is due to remain at £12,570 until 20281. In 2023-24, the full rate of the new state pension takes up all but £1,970 of the personal tax allowance1. If the state pension rose by 8.5%, that would leave just £1,068 of a pensioner's personal tax allowance, which Which? said means even those with a modest private income will be tipped into paying the basic rate of tax at 20%1.
What happens next
The government had not confirmed which wage figure it will use in the uprating calculation, and Which? reported speculation that the lower figure excluding bonuses could be chosen1. The April 2024 increase will follow whichever figure is applied to the triple lock1.
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