The Office for National Statistics (ONS) has confirmed that the Consumer Prices Index (CPI) rose by 6.8 per cent in the 12 months to July 2023, down from 7.9 per cent in June.

This marks the second consecutive month that inflation has fallen and is the lowest level in 17 months.

According to the update from the ONS, falling gas and electricity prices provided the largest downward contributions to the monthly change in CPI annual rates, whilst food prices also rose by less than in July 2022.

Despite the slowing in inflation rates, the UK state pension could be set for a higher-than-expected increase, as the triple lock pledge means that state pensions rise in line with whichever is the highest out of three factors: Wage growth, inflation or 2.5 per cent.

Figures release by the ONS yesterday (15 August) showed annual growth in total pay (which includes bonuses) of 8.2 per cent in April to June 2023, marking the largest growth in annual wages since records began in 2001.

Given this, Aegon pensions director, Steven Cameron, emphasised that "the stakes are high for next year’s state pension triple lock".

"With so much volatility, the state pension triple lock has become quite the roller coaster, so it’s time to ‘hold onto your hats’ for a couple of months," he continued.

"The final earnings component will be announced next month and the final inflation figure in October. But after a double digit 10.1 per cent increase in April 2023, state pensioners could be in for an inflation busting boost in April 2024.”

However, PensionBee director of public affairs, Becky O’Connor, noted that whilst it looks likely that the state pension could rise in line with earnings rather than inflation, rising scrutiny over the cost of the state pension means that the government is under pressure to break or at least adjust the triple lock.

“The government broke the triple lock in the wake of the pandemic when earnings growth soared above 8 per cent that year, so there is precedent for a change on the basis of data that seems too high,” she continued,.

“However breaking a promise on pensioner incomes now would be enormously unpopular. The state pension is a vital part of retirement income and removing guarantees now could worsen the outlook for today’s workers when they come to retire."

This was echoed by Standard Life managing director for retail direct, Dean Butler, who suggested that there is likely to be heightened debate around the long-term affordability of the triple lock, and by extension, the state pension.

Butler also argued that whatever the outcome of this year's triple lock, the long-term consequences on the triple lock will depend on the duration of both high inflation and high average wage growth.

“While the government put a pause on state pension reform earlier this year, and are unlikely to review this in the short term, consistent upwards pressure from either angle could force the government to reconsider,” he added.

Hargreaves Lansdown head of retirement analysis, Helen Morrissey, also raised concerns over the cost of the triple lock, arguing that any relief in the downward pressure on inflation has been replaced by what is going on with average wages.

“The number of people receiving state pension continues to grow, and costs rise along with it, which are borne by the working population," she said. "As the prospect of another blockbusting state pension increase looms on the horizon government will be watching these figures closely.”

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