Speculation is mounting that the government may adjust the triple lock on the national pension in April as inflation falls to its lowest level in two years.
Under the current system, next year’s national pension is scheduled to increase by 8.5% based on income.
Watch now: Liam Harrigan explains new inflation statistics
Meanwhile, gross profits continued to grow at a rate of 7.9%, according to figures released yesterday.
Pension experts say the data is putting “pressure” on whether to adjust the triple lock on the state pension.
The 8.5% is “distorted” by the public sector’s one-off cost of living bonus, leading to speculation that the government may choose to increase the payout by a smaller amount.
Stephen Cameron, director of pensions at Aegon, said: “This ‘real’ income growth of over 3 per cent is good news for working people who are receiving average wage increases, but governments will be considering whether to honor it. “It’s putting pressure on us,” he said. The triple lock will be fully lifted in April next year, likely to be announced as part of the Prime Minister’s autumn statement.
“Official calculations would allow for an 8.5% increase based on year-on-year profit growth from May to July.
“This is even higher than the inflation we have seen in recent months.
“There are rumors that the prime minister has more fiscal leeway than expected, and the government has decided to grant the full 8.5%, which may be a significant increase following the record high of 10.1% in April of this year. However, , which is paid out of today’s workers’ national insurance, raising big questions about intergenerational fairness.
“There are reports that the government is considering adjusting revenue growth rates downward to remove the impact of recent public sector one-off bonuses that have created ‘distortions’.
“A cut to 7.8% would save the government hundreds of millions of dollars, but it risks angering pensioners ahead of next year’s almost certain general election.”
How much will the national pension increase?
The 8.5% increase would mean the new state pension would increase “significantly” from £901.02 a year to £11,501.22 a year.
The ‘old’ basic state pension for people who reached state pension age before 6 April 2016 will increase by £690.40 to £8,812.80.
Prime Minister David Cameron has said the government has more than met its target of halving inflation by the end of this year, and with the current 4.6% well above the Bank of England’s target of 2%, headline interest rates will rise even further. He warned that there was a possibility of a decline. At the beginning of 2024.
He added: “This means there is a real possibility that the 8.5% increase in the state pension will be more than twice the rate of inflation next April.” That’s unsustainable.
“Whatever the decision is next April, volatile price and profit growth are raising concerns that the triple lock in its current form is unsustainable in the long term.
“Ahead of the general election, we are calling on the major political parties to articulate their proposals to make the general election sustainable, credible and fair across generations.”
A Department for Work and Pensions spokesperson said:
“As is the normal process, the Secretary of State will carry out the statutory annual review of benefits and state pensions using the latest data available.”