The State pension is expected to increase by 4.7% next April, pushing annual payments above £12,000 for the first time, according to the latest official figures.
The rise is determined by the government’s triple lock system, which guarantees pensions grow each year by the highest of inflation, average earnings growth, or 2.5%.
With inflation forecast at 4% in September, wage growth figures released by the Office for National Statistics (ONS) on Tuesday are set to be the deciding factor.
If confirmed, the full new state pension will rise to £12,534.60 a year, up around £1,900 over the course of the parliament.
Work and Pensions Secretary Pat McFadden said the government remained committed to the triple lock, despite the significant costs.
“That’s something we said we will do in the election and something that we will keep to,” he said.
The rise is likely to add to the fiscal challenges facing Chancellor Rachel Reeves, who has pledged to cut government debt and balance the budget. The increased payments also edge close to the £12,570 income tax threshold, meaning some pensioners could soon face tax liabilities.
Meanwhile, the ONS data showed pay growth remains strong by historical standards. Average weekly earnings rose 4.7% between May and July, up from 4.5% a month earlier. Pay excluding bonuses slowed slightly, from 5% to 4.8%. With inflation at 3.8%, real wages continue to rise.
But the jobs market showed signs of strain.
However, provisional estimates suggested there were 127,000 fewer payrolled employees in August compared with a year earlier. Vacancies fell for the 38th consecutive period, down by 10,000 from June to August, though the pace of decline has eased.
The unemployment rate remained at 4.7%, though the ONS urged caution over the figures due to low survey response rates.
Separate data showed a record 2.07 million people are now employed by the NHS.
