Comment from Jon Greer, head of retirement policy at Quilter, on the revised ONS wage growth figure: “The ONS’s revision of average earnings growth to 4.8% confirms that the state pension will rise by the same amount next April. For individual pensioners, the increase due to the earnings revision is modest, around 25p a week for those on the full new state pension compared to the previous uprating figure of 4.7%. The real impact is on the public finances, where the cost of uprating pensions continues to spiral.
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“The cost of the triple lock is in the spotlight, appearing increasingly out of step in the medium to long-term. The formula, whichever is highest of earnings growth, inflation, or 2.5 percent, was introduced to protect pensioners during periods of low growth and to address the state pension’s relative decline in value that had occurred in previous decades. But today, it acts as a rigid mechanism that drives up spending regardless of affordability or fairness. While we are still waiting for the next CPI inflation figure to confirm 100% that this will be the next uprating it is likely to be 4.8%.
“A more sustainable alternative would be a smoothed earnings link that would base annual increases on a rolling average of wage growth over three years. This would reduce volatility and better align pension increases with long-term economic trends. Alongside this, in periods where inflation is relatively high, the state pension could increase in line with prices until real earnings recover, at which point it could then revert back to its average wage growth. Effectively, this would maintain the state pension to a benchmark proportion of average earnings. This approach offers a fairer and more predictable framework. It supports pensioners while recognising the pressures on working-age taxpayers and the need for fiscal discipline.
“Today’s figures offer short-term reassurance, but they also reinforce the case for reform. The triple lock has done its job. Now it is time to replace it with a system that is fairer, offers more certainty, and fit for the future.”
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