Total wage growth of 5.5 per cent (including bonuses) has been reported for May to July 2022, locking in the earnings element of the state pension triple lock.
Figures released today (September 13) by the Office for National Statistics showed growth in average total pay (including bonuses) was 5.5 per cent and growth in regular pay (excluding bonuses) was 5.2 per cent among employees in May to July 2022.
Average weekly earnings for total pay was £613 and regular pay was £571 in July 2022.
Head of pensions at Aegon, Kate Smith said today’s earning figure is important for pensioners as it is used for one of the measures in the state pension triple lock formula.
Under the triple lock, pensions increase by the highest of earnings growth, price inflation or 2.5 per cent a year.
The government temporarily suspended the wages element of the pensions triple lock for 2022-23 to avoid a disproportionate rise of the state pension following the pandemic.
former chancellor Rishi Sunak confirmed the return of the triple lock in May, and prime minister Liz Truss has since said she is “fully committed” to the lock.
Smith said: “With inflation into double-digits, average earnings (total pay) of 5.5 per cent isn’t expected to be the deciding factor in next April’s state pension increase. The state pension is likely to increase by around double this at over 10 per cent, confirmed in September’s inflation figure published next month."
She added: “While prime minister Truss committed to reinstating the triple lock in the immediate term during her leadership campaign, questions will remain over its affordability and whether the triple lock will survive in its existing form in the manifestos of all parties ahead of the next general election.”
Employment
Elsewhere within the labour market figures, the UK employment rate for May to July 2022 for people aged 16 to 64 years fell by 0.2 per cent on the quarter to 75.4 per cent and remains below the levels seen during the pandemic.
The unemployment rate for the period fell by 0.2 per cent to 3.6 per cent, the lowest rate since May to July 1974.
But Quilter Investors chief investment officer, Marcus Brookes said this is a lagging indicator of economic activity.
Brookes said: “The slow decrease in unemployment should illustrate the UK is far from an economic nirvana at present, quite the contrary, we are flirting with a recession due to the double whammy of a tight labour market caused by an unexpectedly large shrinking of the workforce post pandemic, Brexit and a cost of living crisis.
“Businesses just last week were facing the prospect of having to shut up shop due to eye watering energy bills which would have seen lots of people become unemployed.
“However, the recently announced energy package should help businesses stay afloat during the winter as they would not be subject to the energy price cap."
But he warned the UK is not creating lots of new jobs due to a prosperous economy.
The number of job vacancies in June to August 2022 was 1.26mn a decrease of 34,000 from the previous quarter and the largest quarterly fall since June to August 2020.
"The Bank of England may well have raised interest rates higher this week in light of the labour market remaining this tight, however the MPC meeting has been delayed,” Brookes said.
“Although yesterday’s GDP figures will have eased any immediate recession fears, the Bank of England and policy makers still have a tricky challenge on their hands.
“Rate rises are likely inevitable to try and tame inflation but whether workers can handle this increase is yet to be seen."
“Truss has had a difficult and unusual start to her time as PM but with these problems looming it is unlikely to let up,” Brookes said.
The Bank of England has postponed its September meeting of the Monetary Policy Committee until 22 September in light of the period of national mourning being observed following HM The Queen’s death.
jane.matthews@ft.com
