According to new estimates from the Office for National Statistics (ONS), UK inflation fell to its lowest level in nearly three years in April as energy prices fell further.

Consumer Prices Index (CPI) inflation fell to 2.3 percent in April, down from 3.2 percent in March – the lowest figure since July 2021, when inflation was recorded at 2%, the Bank of England’s objective.

Nearly 12.7 million people on State Pension in the UK should begin to monitor the CPI because it is part of the Triple Lock measure that determines the annual uprating for the contributory pension.

Future of State Pension Triple Lock Under Scrutiny Amid Potential 5.7% Increase

Under the Triple Lock evaluation, state pensions rise each year in line with the higher of the average annual wage growth from May to July, Consumer Price Index (CPI) inflation in the year to September, or 2.5%.

The New and Basic State Pensions rose by 8.5% in April, which implies that a person on the full New State Pension will earn £221.20, or £884.80, per four-week pay period during the fiscal year 2024/25.

Those on the full Basic State Pension will get £169.50 each week, or £678 per four-week pay period.

Steven Cameron, Aegon’s Pensions Director, outlines what the new 2.3% inflation number means for the future of the State Pension Triple Lock, as well as how current efforts might increase payouts by 5.7% next April.

He stated: “For the April 2024 increase, earnings growth in 2023 produced an inflation-busting 8.5 per cent increase. In April 2023, a spike in inflation the previous year led to a record-breaking 10.1 per cent boost to the State Pension. These increases and the underlying high volatility that was present in both price inflation and earnings growth, have since raised serious questions over longer term affordability of the State Pension, which is paid for by today’s workers through National Insurance Contributions.

“With inflation having now fallen below the 2.5 per cent underpin, it’s likely to be earnings growth that determines next year’s Triple Lock increase, as the latest figures have this sitting at 5.7 per cent (for January to March 2024).

“The specific figure used for determining the Triple Lock will be the year-on-year increase in earnings for the period ending May to July 2024, which will be published in September. Barring a significant drop in earnings growth over the next few months, this figure will likely determine next year’s Triple Lock.”

State Pension Uprating Estimates for 2025-26

As Steven mentioned, the Triple Lock appears to be determined by the profits growth aspect, which is now at 5.7%. However, this figure might fluctuate and is not the final metric used to decide the level of uprating.

However, a 5.7% rise in the present State Pension would result in people receiving:

• Full New State Pension – £233.80 per week, £935.20 every four-week pay period, and £12,157.60 for the fiscal year 2025/26.
• Full Basic State Pension – £178.40 per week, £713.60 each four-week pay period, and £9,276.80 for the fiscal year 2025/26.

Steven went on to say: “If price inflation stays low and earnings growth also gradually falls back to levels more typical of the last decade, then the State Pension Triple Lock formula may produce more predictable and affordable increases.

“This will make it less costly for the next Government to commit to maintain it for a further 5 years. We may see lower rates of increases, but in times of lower inflation, the State Pension doesn’t need to increase by as much to allow pensioners to maintain living standards.

“However, rather than a three-way comparison year on year, we’d recommend averaging the earnings component over a three-year period, which could smooth out excessive volatility and help ensure intergenerational fairness.”

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