Average wage growth and the State Pension - what it means for you

On Tuesday 15 September, the Office for National Statistics (ONS) released the average weekly earnings report for May to July, year-on-year. 

The data shows that, for 2026, growth of employees’ average earnings in that 12 months was 3.9%.

Unless you’re a passionate statistician, the average wage growth figures might not be particularly glamorous news to you.

But this data  is important, especially if you’re soon to be or already receiving the State Pension. 

It’s one of the three metrics used under the triple lock. That's what decides how much the State Pension will increase by when the new tax year starts on 6 April 2027.

And this year, that’s key. With tax thresholds having been frozen for so long, some State Pension income itself will be taxable next year as it stands.

Find out why, what this 3.9% figure means, and how much the State Pension will pay from next April.

The State Pension will rise 3.9% next year

All this matters because of the State Pension triple lock. 

As a quick recap, the triple lock’s a government measure to protect the State Pension’s spending power. It was announced at the 2010 Budget and came into effect in April 2011.

Each year, the State Pension’s increased by the highest of three (hence ‘triple’) metrics. These are:

• the CPI inflation figure announced in September;
• average earnings growth from May to July, as described above; or
• a flat 2.5%.

Average earnings growth has topped this list for this year. So, on 6 April 2027, the full State Pension will increase by that much.

The table below shows you what you’ll get depending on whether you receive the new State Pension, or the basic State Pension.

To get the full new State Pension, you need 35 qualifying years on your National Insurance (NI) record. You need at least 10 years to get any State Pension at all. 

In 2026/27, the State Pension age is 66, rising to 67 by 2028.

State Pension income’s set to be taxed

The State Pension rising in line with the cost of living’s a good thing for those who receive it.

However, there’s a fly in the ointment this year: for the first time, the full new State Pension’s set to exceed the tax-free Personal Allowance.

State Pension income counts towards your overall income. But up to now, that income itself wasn’t taxed.

That’s because it was always below the Personal Allowance, the tax-free band for Income Tax. In 2026/27, the Personal Allowance is £12,570.

But the Personal Allowance has been frozen since 2021. Meanwhile, the State Pension’s steadily increased under the triple lock. 

As it stands, when the 2027/28 tax year starts on 6 April 2027, the Personal Allowance will be £12,570. And with the State Pension at £13,036, that means £466 of State Pension income’s potentially taxable. 

It might not be a significant tax bill. But considering that the triple lock was introduced to stop pensioner poverty, it’s strange for part of that income to now be taxable.

The government has previously said that those who rely solely on the State Pension won’t have to pay tax during this parliament, set to end by 2030 at the latest. However, nothing’s been formally announced yet, and that could change.

Will there always be a triple lock?

The other question around the triple lock that you might’ve seen in the news is its long-term viability.

Previously, the State Pension largely rose in line with price rises. That led its payments to fall behind working households’ earnings. 

The triple lock has helped close that gap. Now, it’s extremely valuable to those who receive the State Pension. It ensures that their payments keep their spending power, rather than being eaten away by inflation over time, or falling behind working households’ income.

It’s also a hugely important lifeline for many, as Department for Work and Pensions (DWP) figures show. It found that, in the financial year ending 2025, 12% of pensioners relied solely on the State Pension and state benefits.

However, that value has an eye-watering cost. In 2026/27, State Pension spending is £154 billion a year, by far the biggest benefit the UK government pays out.

Modelling by the Institute for Fiscal Studies (IFS) found that by 2050, the triple lock could cost between an extra £5 billion and £40 billion a year. That wide range comes simply from the uncertainty of using those three figures.

So far, there’s no suggestion that the triple lock will be scrapped. But it could become more pressing as the State Pension cost keeps rising.

{{main-cta}}

Save for your future with your own pension

For now, the State Pension’s valuable for those who receive it. Offering a guaranteed income, it can provide the bedrock of your retirement spending.

However, according to the Retirement Living Standards income estimates, it still isn't enough. With State Pension income alone, you'd fall short of the one-person household’s minimum standard of living in retirement. That’s true even with this year’s 3.9% uplift.

That’s why it’s useful to contribute to a personal or workplace pension. Building your own pot can help you ensure you have enough to draw on in later life.

Plus, with tax relief and potential investment returns, you could grow your savings throughout your working life.

Combined with the full new State Pension, that could allow you to create a healthier retirement income.

That way, by the time you reach State Pension age (66, rising to 67 by 2028), you give yourself the chance of having what you need to reach your goals in later life.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.