The 8.5 per cent increase in average annual earnings growth between May and July is good news if you receive the state pension – as, in theory, given the triple lock, this means pensions will increase by this amount in turn. Even if, as rumoured, the government opts to instead use the ex-bonus wage growth figure (7.8 per cent), that would still be a decent increase ahead of inflation.
The one downside is that the state pension will eat up even more of the £12,570 personal allowance for income tax. An 8.5 per cent increase, for example, would increase its total value from £10,600 this tax year to over £11,500 in 2024-25. Income over the value of the personal allowance is taxed at 20 per cent and, because this allowance is frozen until at least April 2028, the entire personal allowance could soon be used up in this way.