Pension uplift as triple lock holds

Millions of pensioners across the UK are expected to receive a state pension rise of 4.7% next April, a figure that exceeds inflation and could place further strain on public finances just as Chancellor Rachel Reeves considers potential tax increases in the upcoming Autumn Budget. 

Labour has pledged to maintain the state pension triple lock, which ensures payments rise each year by whichever is highest out of 2.5%, inflation in September, or average earnings growth over the three months to July.

New data released this week shows that average weekly earnings, including bonuses, were 4.7% higher between May and July compared to the same period last year. With September’s inflation figure currently sitting at 3.8%, experts believe the earnings growth measure will set next year’s state pension increase.

The Government will confirm the final uplift ahead of the Budget, but Work and Pensions Secretary Pat McFadden reiterated Labour’s commitment to the triple lock on Tuesday.

“That’s a commitment from the Labour government to the UK’s pensioners,” he said. “It’s something that we said we’d do at the election and something that we will keep to.”

The confirmation that the triple lock will be upheld has come as a relief to many as there had been rumours that it might be abandoned as another part of Labour’s tax campaign.

The ‘Triple Lock’ explained

The ‘triple lock’ refers to a well-known state pensions policy that ensures state pensions rise every year by either the average earnings growth, inflation (as measured by the Consumer Prices Index) or a flat 2.5% - whichever is highest that year, hence the name ‘triple’ lock.

It was designed in principle to make sure that state pension value would always have the best growth outcome each year for pensioners. The guarantee that the highest of the three will be what pensions grow against ensures that savers have three layers of protection against inflation, hence the name ‘triple lock’. This is incredibly important in maintaining a level of healthy financial security for those relying on their pensions, as it guarantees growth irrespective of how volatile the economy becomes.

If you want to find out more about retirement planning, why not give us a call on 0333 323 9065 or book a free non-committal initial consultation with one of our chartered advisers to find out how we might be able to help you.

Arrange your free initial consultation

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available.