Pensioners will receive an above average increase to the state pension in April.
This follows the announcement by the Office of National Statistics that inflation (as measured by the Consumer Price Index) stood at 2.4 per cent in September.
Under the terms of the triple lock, pensions are increased by whichever is higher: the growth in earnings, the growth in prices, or 2.5 per cent.
It is September’s inflation figures that are key to setting a range of benefits including the state pension.
With cheaper food driving inflation down, pensioners look set to get an above inflation increase, as earnings growth has been significantly stronger, with average earnings rising by 2.7 per cent in August, and the 2.6 per cent in July.
Philip Hammond is likely to confirm future pension increases in the Autumn Budget.
Hargreaves Lansdown head of policy, Tom McPhail says that if the July earnings figures are used this will see the new state pension increase from £164.35 to £168.60.
On an annual basis this state benefit will be worth £8,767.20.
The lifetime allowance is also due to increase in line with September’s CPI figures. This should mean it is worth £1,054,800 – baring any adjustments made in the Budget.
McPhail says: “It was no surprise then last week to see the government reiterate its commitment to the triple lock for the remainder of this parliament.
“At some point in the future a government (presumably not this one) is likely to have to grasp the nettle and move away from the triple cock. If this doesn’t happen then the state pension will inexorably increase relative to earnings and inflation.”
He adds that in the meantime, the state pension provides pensioners with a vital bedrock income to cover much of their essential expenditure in retirement.
Royal London director of policy Steve Webb points out that old basic state pension will also move up in line with average earnings. Pensioners on the old pensioner system will also see an increase in other elements of their pension, such as Serps, although this will only be increased in line with CPI.
However he points out the main rate of the guarantee credit for the poorest pensioners is linked by law to the growth in average earnings.
He adds: “Whilst the rates of working age benefits have been squeezed for many years, pensioners look set to enjoy another above-inflation increase.” He points out those on the new state pension will get an additional £200 plus a year.