The Conservative government is set to break a key manifesto pledge next year to avoid placing further pressure on the strained public finances.
The state pension will rise 2.5 per cent next year, breaching the Tories’ promise to retain the triple lock increase.
Under the policy, the state pension rises by whichever is highest out of inflation, average earnings or 2.5 per cent.
Ministers are expected to choose the latter rate of increase amid surging earnings growth, according to reports in The Times.
Figures released by the Office for National Statistics yesterday show average total pay soared 8.8 per cent over the last year, driven by base effects caused by people on furlough on returning to jobs and having their pay restored.
Raising the state pension in line with wage growth will cost the government an additional £8bn.
A government source told The Times: “It’s very difficult to justify anything higher at a time when public sector pay is frozen and there’s economic uncertainty.”
Last month, chancellor Rishi Sunak hinted he may either suspend or scrap the triple lock.
“We want to make sure the decisions we make and the systems we have are fair, both for pensioners and taxpayers,” he said.
Number 10 yesterday insisted “no decisions have been made” on whether to scrap the triple lock on pensions, amid speculation ministers could water down the policy.
Sunak is yet to name a date for the next Budget. He has reiterated that he wants to steer the public finances back to a sustainable path to offset the high cost of paying for the response to the Covid crisis.