High wages and inflation – how do they affect the pension triple lock and the state pension?

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We look at how the pension triple lock is set to increase the state pension with wages likely the main influencer.

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18 August 2023

This month’s wages and inflation data provided food for thought with inflation continuing to fall — hitting 6.8% in July. However, this was offset by data showing average wages (including bonuses) grew by a whopping 8.2%.

Slowing inflation and rising wages sound like good news for our overstretched budgets but, when it comes to the state pension, it leaves the government with a major headache.

The state pension forms the backbone of many people’s retirement income and is increased every year by what is known as the triple lock.

The government has pledged to up the state pension by whichever is the highest of 2.5%, average wage growth or inflation (based on the Consumer Price Index, CPI). It was introduced more than a decade ago to ensure pensioners got decent increases