State pension to rise by £460 next year

The state pension is set to rise by £460 a year from April after the latest official data showed wages grew by 4 per cent.
Under the so-called “triple lock”, the state pension goes up each year by either 2.5 per cent, the rate of inflation or average earnings, whichever is the highest figure.
The Office for National Statistics (ONS) reported on Tuesday that, including bonuses, pay rose by 4 per cent annually over the three months to July, down from 4.6 per cent in the previous quarter and below economists’ expectations of 4.1 per cent. Inflation is currently 2.2 per cent.
The expected rise comes ahead of a key vote in the Commons today on Sir Keir Starmer’s plan to scrap paying winter fuel payments of up to £300 for all but the poorest pensioners.
One of the central arguments of the prime minister is that the triple lock has consistently raised the state pension to a level that now means additional payments are largely not necessary.
Relative poverty among pensioners has fallen from 29 per cent in 1998 to 16 per cent in 2022 as a result of the triple lock. However, there are still 1.3 million pensioner families living in after-housing costs poverty today who are not in receipt of pension credits and who will lose the winter fuel payment, according to the Resolution Foundation think tank.
Wage growth fell for the fourth month in a row as demand for workers receded. It signalled that the labour market has gradually cooled amid a rise in interest rates and sluggish consumer spending, raising the chance that the Bank of England will cut interest rates again later this year.
Easing pay growth is seen by the Bank of England as key to bringing inflation to heel over the long term, suggesting that the latest step down in wage settlements could convince the central bank’s rate-setting committee to lower borrowing costs again.
The rate of unemployment dropped to 4.1 per cent from 4.2 per cent.
The ONS also said the estimated number of vacancies in the UK in June-August 2024 was 857,000, a decrease of 42,000, or 4.7 per cent, from March-May.
The Bank’s monetary policy committee, the nine-strong group tasked with setting the base level of interest in the UK every six weeks, is expected to keep the base rate unchanged at 5 per cent at its meeting next Thursday.
However, investors believe that the committee will cut borrowing costs at its November meeting and bring the base rate down to around 3.5 per cent by the end of 2025. A slim 5-4 majority of the committee, including Andrew Bailey, the governor of the Bank of England, backed lowering interest rates by 25 basis points from 5.25 per cent on August 1.
Liz McKeown, director of economic statistics at the ONS, said: “Growth in total pay has slowed markedly again as one-off payments made to many public sector workers in June and July last year continue to affect the figures. Basic pay growth also continued to slow, though less sharply.
“When taken together on a comparable basis, our different measures all show growth in the number of employees over the latest quarter, though annual growth has slowed over the year.
“Meanwhile, there was a decrease in the number of self-employed people and a fall in both those looking for a job and not looking for or available to start working.”
The rate of economic inactivity, when a person is neither employed nor looking for a job, dropped to 21.9 per cent over the last quarter.
Britain’s economy has been constrained by a loss of workers from the labour market since the Covid 19 pandemic, which experts think has been driven by increased prevalence of long-term sickness.
Since Labour won the election in July, economic data has been broadly positive, with ONS figures showing that UK GDP expanded at the quickest pace in the G7 in the first half of this year.
Although inflation increased to 2.2 per cent in the year to July, it remains close to the Bank of England’s official target of 2 per cent.