The Office for National Statistics’s upward revision of earning figures will saddle Rachel Reeves with an “unwelcome” extra £100mn bill for the state pension rise next year, according to LCP partner, Steve Webb.
Today (October 15), the ONS released its Labour Market Overview for October 2024, detailing the revised figures for average earnings growth in the three months to July this year, which are “crucial” when calculating the triple lock.
Last month the provisional estimate was 4 per cent growth when compared to the same three month period in 2023 but, today, this has been raised to 4.1 per cent.
Webb pointed out that this extra 0.1 per cent adds around £100mn to the state pension bill under the triple lock formula.
The triple lock applies to the old “basic” pension, which costs £68.4bn this year, and the new state pension, which costs £45.8bn.
This equates to a total cost of £114.1bn, an extra 0.1 per cent of which is £114mn and, after adjusting for pensions paid to frozen countries, suggests a total figure of around £100mn for the extra cost of today’s revision.
LCP detailed what this means for pensioners, pointing out that this revision will see new state pension payments increase by £9.10 per week to £230.30.
This means that, per annum, new state pension payments will increase by £473
As a result of the changes, the new state pension will be just under £12,000 per year.
Webb stated: “A slightly higher rate of increase is welcome for pensioners, though will be an unwelcome £100mn extra cost for the chancellor as she prepares her Budget.
“The rate of the new state pension will now be close to £12,000 per year, very near to the £12,570 tax-free allowance.
“This is likely to put extra pressure on the chancellor to take action on tax allowances in the coming years.”
tom.dunstan@ft.com
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