State pension could rise to £10k a year after economy boost post-lockdown

In light of fresh data published today, the state pension is due to rise to £10,000-a-year.

It comes as wages are rising by 7.4% with the economy and jobs recovering from the coronavirus pandemic.

But the figures are due to dictate the state pension rise which takes place each year in April.

The average wage is now at its highest because CPI inflation is currently at 2.4%.

And a 7.4% increase would bump up the state pension payment to a little over £10,000-a-year, from the current £9,340.

Meanwhile economic forecasters have warned the wage growth could increase further and hit a high of 8%.

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Steve Webb, former pensions minister and a partner at LCP, said: “Average earnings are well above their level a year ago, partly because some furloughed workers are back on full pay and also because some lower paid jobs have been lost altogether.”

The rate of wage growth is increasing with the economy growing again post-lockdown.

As for the state pension, it also increased by 2.5% for April 2021 using the triple lock formula and rose by 3.9% in 2020 based on wage growth.

Chancellor Rishi Sunak is believed to be considering a change to the triple lock to take into account a year of highly unusual data impacted by the pandemic.

Instead Mr Sunak could opt for a temporary “double lock” and exclude the wage data.

Another option being considered is averaging out the data over two years, but the Conservative Party’s election manifesto pledged to keep the triple lock.

Steve said: “These figures pile pressure on the Chancellor as he will want to stick to his triple lock policy but not pay a huge increase to pensioners, especially at a time when many working age benefits are about to be cut by £20 per week.

“This is ultimately a political judgment for the government, but the most likely option remains to look for a measure of earnings growth which strips out the effect of the pandemic.

“This could save the Chancellor several billion pounds a year while still allowing him to claim he had kept to the ‘spirit’ of the triple lock promise.”