London Daily

Focus on the big picture.
Thursday, Dec 04, 2025

Chancellor Rishi Sunak hints at ruling out 8% pension rise

Chancellor Rishi Sunak hints at ruling out 8% pension rise

The chancellor has given his strongest indication yet of ruling out a predicted 8% rise in the state pension next year.

Official forecasts suggest that the link with earnings growth could mean the bumper rise in the amount paid from April 2022.

Rishi Sunak told the BBC a decision on pensions would be "based on fairness for pensioners and for taxpayers".

Various commentators have called for an overhaul of the rules.

However, groups representing older people say the government's promises to pensioners should remain.

Mr Sunak told BBC Radio 4's Today programme: "The triple lock is government policy but I recognise people's concerns about what that might mean, given some of the numbers that are being put around.

"We will approach these decisions with fairness in mind - fairness for both pensioners but also for taxpayers."

He said there were "some questions around the earnings numbers".

Why would the state pension rise?


The rise in pensions each year is governed by what is known as the triple lock - a Conservative manifesto promise until at least 2024.

This means the state pension increases in line with the rising cost of living seen in the Consumer Prices Index (CPI) measure of inflation, increasing average wages, or 2.5%, whichever of those three is highest.

Predictions by the Bank of England suggest that average earnings could go up by 8%, hence the equivalent rise in the state pension.

That would cost the Treasury £3bn more than previously anticipated, according to the government's official forecaster - the Office for Budget Responsibility.

Many economists point out the sharp rise in earnings is an anomaly created, in part, by calculations being affected by people coming off furlough.

Can the chancellor break the promise?


There is no reason in law why the chancellor cannot change the way earnings are judged in the triple lock system.

He is certainly under pressure to do some from some quarters.


Lord David Willetts, president of the Resolution Foundation, a think tank focusing on people on lower incomes, said: "The Covid crisis has laid bare the design faults of the triple lock, with a severe jobs crisis last year inadvertently contributing to an unnecessary and unjustified 8% rise in the state pension next year.

"The chancellor should take the opportunity this autumn to replace the triple lock with a smoothed earnings link. This would mean the state pension would rise in line with the living standards of working age people - a change that would be fair to all generations."

However, Caroline Abrahams, charity director at Age UK, said: "We do not think the government should rush headlong towards a decision to suspend it. Pensioner poverty has been rising in recent years.

"While older people we speak to are generally keen to do their bit to help as the pandemic continues, they are also wary of unscrupulous policymakers who might want use exceptional times as a reason to make permanent changes - a government sleight of hand that would not be acceptable at all."

How can 'fairness' be judged?


The chancellor said that he would hold "fairness in mind" for any decision that it is made, but fairness can be hard to quantify.

At present:

*  The full, new flat-rate state pension (for those who reached state pension age after April 2016) is £179.60 a week

*  The full, old basic state pension (for those who reached state pension age before April 2016) is £137.60 a week

That is one of the least generous state pensions in Europe, even if there was a significant rise next year.

The former pensions minister, Baroness Ros Altmann, also pointed out that, for many people, the state pension was their only retirement income.

"Millions of pensioners - especially women - rely solely on state pensions because they did not have the opportunity to build up private pensions when younger," she said.

She has called for a wholesale review of pensioner benefits, rather than a short-term change in the rules.

Other considerations of "fairness" might also include the wide range of life expectancy in different parts of the country, the different rules determining the rise in Pension Credit - a state pension top-up, and the expectations of younger people about their eventual state pension entitlement.


At a time when the official recommendation for the main NHS pay award is well below inflation, a rise of 8% for the state pension would appear to be an outlier.

The chancellor's comments this morning are the clearest indication that it will not happen.

To be clear, it is very much a distortion. Average earnings were depressed in the pandemic by a reduction in hours worked. The official figures showed earnings were falling. From this lower base, the resumption of normality will lead to a very high number, when comparing one quarter this year to the same quarter in 2020 during lockdown.

But this also reflects the design of the triple lock. As the OBR put it, "it has no memory". The point of the lock was, last year, to deliver a 2.5% rise in pensions this year, despite earnings being -1% and inflation being just 0.5%.

The state pension was shielded from what was happening everywhere else in the economy last year. But its current design disregards that history and will lead to a compensatory bumper boost, if it is measured as in the past (growth in the quarter to July over same quarter last year), although we won't get the figures until autumn.


Chancellor Rishi Sunak: "We want to make sure the decisions we make are fair... both for pensioners and for taxpayers"


Newsletter

Related Articles

0:00
0:00
Close
UK Inquiry Finds Putin ‘Morally Responsible’ for 2018 Novichok Death — London Imposes Broad Sanctions on GRU
India backs down on plan to mandate government “Sanchar Saathi” app on all smartphones
King Charles Welcomes German President Steinmeier to UK in First State Visit by Berlin in 27 Years
UK Plans Major Cutback to Jury Trials as Crown Court Backlog Nears 80,000
UK Government to Significantly Limit Jury Trials in England and Wales
U.S. and U.K. Seal Drug-Pricing Deal: Britain Agrees to Pay More, U.S. Lifts Tariffs
UK Postpones Decision Yet Again on China’s Proposed Mega-Embassy in London
Head of UK Budget Watchdog Resigns After Premature Leak of Reeves’ Budget Report
Car-sharing giant Zipcar to exit UK market by end of 2025
Reports of Widespread Drone Deployment Raise Privacy and Security Questions in the UK
UK Signals Security Concerns Over China While Pursuing Stronger Trade Links
Google warns of AI “irrationality” just as Gemini 3 launch rattles markets
Top Consultancies Freeze Starting Salaries as AI Threatens ‘Pyramid’ Model
Macron Says Washington Pressuring EU to Delay Enforcement of Digital-Regulation Probes Against Meta, TikTok and X
UK’s DragonFire Laser Downs High-Speed Drones as £316m Deal Speeds Naval Deployment
UK Chancellor Rejects Claims She Misled Public on Fiscal Outlook Ahead of Budget
Starmer Defends Autumn Budget as Finance Chief Faces Accusations of Misleading Public Finances
EU Firms Struggle with 3,000-Hour Paperwork Load — While Automakers Fear De Facto 2030 Petrol Car Ban
White House launches ‘Hall of Shame’ site to publicly condemn media outlets for alleged bias
UK Budget’s New EV Mileage Tax Undercuts Case for Plug-In Hybrids
UK Government Launches National Inquiry into ‘Grooming Gangs’ After US Warning and Rising Public Outcry
Taylor Swift Extends U.K. Chart Reign as ‘The Fate of Ophelia’ Hits Six Weeks at No. 1
250 Still Missing in the Massive Fire, 94 Killed. One Day After the Disaster: Survivor Rescued on the 16th Floor
Trump: National Guard Soldier Who Was Shot in Washington Has Died; Second Soldier Fighting for His Life
UK Chancellor Reeves Defends Tax Rises as Essential to Reduce Child Poverty and Stabilise Public Finances
No Evidence Found for Claim That UK Schools Are Shifting to Teaching American English
European Powers Urge Israel to Halt West Bank Settler Violence Amid Surge in Attacks
"I Would Have Given Her a Kidney": She Lent Bezos’s Ex-Wife $1,000 — and Received Millions in Return
European States Approve First-ever Military-Grade Surveillance Network via ESA
UK to Slash Key Pension Tax Perk, Targeting High Earners Under New Budget
UK Government Announces £150 Annual Cut to Household Energy Bills Through Levy Reforms
UK Court Hears Challenge to Ban on Palestine Action as Critics Decry Heavy-Handed Measures
Investors Rush Into UK Gilts and Sterling After Budget Eases Fiscal Concerns
UK to Raise Online Betting Taxes by £1.1 Billion Under New Budget — Firms Warn of Fallout
Lamine Yamal? The ‘Heir to Messi’ Lost to Barcelona — and the Kingdom Is in a Frenzy
Warner Music Group Drops Suit Against Suno, Launches Licensed AI-Music Deal
HP to Cut up to 6,000 Jobs Globally as It Ramps Up AI Integration
MediaWorld Sold iPad Air for €15 — Then Asked Customers to Return Them or Pay More
UK Prime Minister Sir Keir Starmer Promises ‘Full-Time’ Education for All Children as School Attendance Slips
UK Extends Sugar Tax to Sweetened Milkshakes and Lattes in 2028 Health Push
UK Government Backs £49 Billion Plan for Heathrow Third Runway and Expansion
UK Gambling Firms Report £1bn Surge in Annual Profits as Pressure Mounts for Higher Betting Taxes
UK Shares Advance Ahead of Budget as Financials and Consumer Staples Lead Gains
Domino’s UK CEO Andrew Rennie Steps Down Amid Strategic Reset
UK Economy Stalls as Reeves Faces First Budget Test
UK Economy’s Weak Start Adds Pressure on Prime Minister Starmer
UK Government Acknowledges Billionaire Exodus Amid Tax Rise Concerns
UK Budget 2025: Markets Brace as Chancellor Faces Fiscal Tightrope
UK Unveils Strategic Plan to Secure Critical Mineral Supply Chains
UK Taskforce Calls for Radical Reset of Nuclear Regulation to Cut Costs and Accelerate Build
×