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DWP triple lock warning over State Pension increase | Personal Finance | Finance

The state pension increase for next year is still up in the air as a key factor that could determine the triple lock figures for this year remains undecided.

Experts at savings platform Marygold & Co said it’s difficult to know how much the state pension increase will be, given the major impact of Labour’s first Budget is yet to be fully felt.

Matthew Parden, CEO of the group, said: “The biggest unknown is the exact impact of last year’s budget on wage growth, and consequently on the average earnings growth for the year to September 2025.

“Reports of staff layoffs and potential hiring freezes have emerged, and whilst wages rose by 5.6% [for the year to January], with 6% in the private sector and 4.1% in the public sector, there is likely to be downward pressure on wage growth.”

The triple lock metric determines the increase in the state pension in line with the highest of 2.5%, the increase in total average earnings for the three months to July, or the CPI inflation figure for the year to September.

One major change soon coming in from April, as set out in Rachel Reeves’ first Budget, is the increase in the part of National Insurance that employers pay, rising from 13.8% to 15%.

This will increase costs for employers, prompting concerns that this could reduce the UK’s prospects for economic growth over the months ahead.

Mr Parden warned: “If Rachel Reeves’ budget leads to a halt in hiring and further layoffs, the pressure on wage growth will be downward. This would mean that the triple lock could be a toss-up between CPI and 2.5%.

“If the Budget continues to result in higher unemployment, and consequently demand-led pressures on consumption, the question would then be whether downward price pressures could offset the impact of supply-side economic forces such as tariffs and trade wars, which could lead to higher prices.”

The Bank of England recently halved its growth forecast for this year, down from 1.5% to just 0.75%. The bank’s governor, Andrew Bailey, told the BBC he thinks there will be a “pick up” in growth.

But he acknowledged the situation is volatile, saying: “I do understand that there is more uncertainty, there is more uncertainty in the world as well as domestically, all of which gets factored in. But we are still seeing positive growth in household real incomes, that’s obviously good.”

Inflation was at 3.5% for the year to January, above the Bank of England’s target of 2%. Mr Parden warned: “If inflation remains high, it will continue to drive up pension increases, putting more pressure on the sustainability of the triple lock policy.

“This is particularly the case if inflation remains a dominant factor in determining the increase, as the policy would require substantial payouts to keep up with inflation, potentially straining public finances.

“This issue will remain a challenge for any future Government and Chancellor, especially if inflation pressures persist.”

State pension payments will go up 4.1% next April, with the average earnings figure used this year to determine the increase.

This will raise the full new state pension from £221.20 a week to £230.25 a week, while the full basic amount will increase from £169.50 a week to £176.45 a week.

You can find out how much state pension you are currently on track to receive using the state pension forecast tool on the Government website.

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