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NewsDWP State Pension increase warning over 'big unknown'Major changes that have yet to come in could have a big impactleicestermercuryBookmarkShareCommentsNewsByNicholas Dawson03:04, 11 FEB

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The fate of next year's state pension increase hangs in the balance as a key element that could determine the triple lock remains undecided. Experts from savings platform Marygold & Co

have said it's too early to tell how much state pension payments will go up next April, especially as the full effects of Labour's inaugural Budget are still unknown.

Matthew Parden, CEO at Marygold & Co, shared his insights: "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 policy adjusts the state pension according to the highest of three factors: either 2.5%, the rise in total average earnings for May to July, or the Consumer Price Index (CPI)

inflation rate for the 12 months to September. One major change coming in from April thanks toe Rachel Reeves' first Budget is the increase in the part of National Insurance paid by

employers, climbing from 13.8% to 15%. Concerns are mounting that this additional expense could hinder UK economic growth prospects in the months to come

Mr Parden cautioned: "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 has recently cut its growth forecast for this year from 1.5% to just 0.75%. The bank's governor, Andrew Bailey, remains optimistic about a growth "pick up" despite

acknowledging the current volatility. He told the BBC : "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."

With inflation standing at 3.5% for the year to January, surpassing 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 are set to rise by 4.1% next April, with the

average earnings figure from this year being used to determine the increase.

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

can check how much state pension they're currently on track to receive by using the state pension forecast tool available on the Government's website.

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