As wage growth continues to outpace inflation, this is very likely to be a key driver of state pension increases under the triple lock.
The triple lock aims to increase the state pension each year by the higher of Consumer Price Index (CPI) inflation, the average wage or 2.5%.
The latest figure for average pay including bonuses for April to June 2024 was 4.5%. This is significantly lower than last month’s 5.7% but is affected by the NHS lump sum payment made in June last year.
The key pay data that will affect the triple lock will be released next month, covering the period from May to July 2024.
It will be a blow to pensioners, but the effects of these lump sum payments will likely continue and wage growth will slow, meaning they will receive less of an increase in their state pension than they would have otherwise received.
Read more: What to do if you’ve paid too much tax on your pension
If the figures remain the same next month, the new state pension figure could rise by around £517 to around £12,019 a year from April next year.
These increases will be welcomed by pensioners who are still recovering from the cost of living crisis, but with many still reeling from the recent news that winter fuel payments are set to be cut, they are unlikely to be as big an increase as many had hoped.
Another immediate challenge: With the tax threshold frozen, the full amount of the new state pension is gradually approaching the taxable amount, and could exceed it if it rises again next year.
It could also be problematic for basic pensioners, who have additional income from their second state pension and may be approaching the threshold. These freezes will be in place until 2028, increasing the likelihood that pensioners who are entirely reliant on their state pension will find some of it going to the taxman soon.
The State Pension forms the basis of people’s retirement income, but if you want an adequate retirement income it’s essential that you top it up with your own retirement savings through a workplace pension or SIPP.
The story continues
Read more: How much do you need to save for retirement?
With the latest data from Hargreaves Lansdown’s Savings and Resilience Barometer showing that just 38% of households currently expect to have a moderate income in retirement, it’s clear there is still much work to be done.
Taking small actions like increasing your contributions every time you get a raise or start a new job is one way to increase your contributions, but it’s also important to make sure you’re making the most of what your employer can contribute.
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