DWP rule will see extra £470 a year paid to people on state pension from April

State pensioners could get an extra £470 a year from the Department of Work and Pensions (DWP) from next April thanks to the triple-lock rule.

Under the triple-lock guarantee, the state pension increases every April in line with whichever is the highest out of earnings growth (from May to July of the previous year) Consumer Prices Index inflation (in September of the previous year) or 2.5 per cent.

Last year, the increase was determined by earnings growth, which see saw state pensions rise by 8.5 per cent. This year, with inflation running at more subdued levels, it is expected that earnings growth will again be the highest deciding factor.

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Today, the Office for National Statistics (ONS) published revised official figures for earnings growth up to July this year.

Last month, figures indicated that total pay had increased by 4.0 per cent annually in the three months to July, but today, when jobs data was released, the ONS revised the figure up to 4.1 per cent.

A 4.1 per cent state pension rise would see around £470 extra a year handed to those on the new state pension. The new state pension, for people who reached state pension age after April 2016, would rise from £221.20 per week to £230.30 next year, while the old basic state pension would increase from £169.50 per week currently to £176.45 next year.

But while the revised figure is good news for pensioners, the extra 0.1 per cent will see an extra £100 million added to the government's bill.

Sir Steve Webb, a former Liberal Democrat pensions minister who is now a partner at consultants LCP said: “A slightly higher rate of increase is welcome for pensioners, though will be an unwelcome £100 million extra cost for the Chancellor as she prepares her Budget.

“The rate of the new state pension will now be close to £12,000 per year, very near to the £12,570 tax-free personal allowance. This is likely to put extra pressure on the Chancellor to take action on tax allowances in the coming years.”

The final decision on how much state pensions will rise by in 2025 is likely to be announced in the Autumn Budget, set to take place on October 31.

The potential pensions boost comes at a time when many pensioners face losing winter fuel payments. Chancellor Rachel Reeves announced a plan to limit the winter fuel allowance in July, as she said there was a need to fill a £22 billion “black hole” in the public finances.

Only those who claim pension credit and other means-tested benefits will receive it after the change, which is expected to reduce the number of pensioners in receipt of the up to £300 payment by 10 million, from 11.4 million to 1.5 million.