15 August 2023
If you are covering the latest DWP state pension statistics, please see the following comment from Jon Greer, head of retirement policy at Quilter:
“The cost of the state pension is becoming increasingly burdensome to the government, and it is expected to grow worse still. Just last week it was reported that the cost of the state pension is set to soon be higher than education, policing, and defence combined, and the latest figures from the Department for Work and Pensions (DWP) show this is unlikely to change.
“The number of people receiving the state pension has risen by 140,000 in the last year alone, with the total number of claimants reaching a huge 12.6 million. Given the data only cover the period to February 2023, the real number is likely to be higher, and draws into question the sustainability of the triple lock.
“ONS data released this morning confirmed average pay including bonuses has risen to 8.2%, which is 2% higher than the 6.2% the government estimated in its budget for the state pension triple lock. Given the triple lock sees the state pension increased by the highest of earnings growth, inflation or 2.5%, if inflation falls tomorrow as anticipated then we can expect next month’s earnings figure to determine the state pension uprating which will come at a considerable cost to government above that expected.
“If wage growth comes in at 8.5% next month, our forecasts show the state pension could cost the government over £2 billion more in the 2024/25 tax year than expected.
“Despite the cost, it is unlikely the Conservative government will backtrack on its triple lock promise. Over the last few years, the triple lock has been an area of significant contention and with the next general election looming large the Conservatives will be reluctant to rock the boat with core voters. It is inevitable though that at some point the uprating of state pensions will be replaced with a less generous uprating mechanism, though exactly what this looks like remains to be seen.”
