UK will not raise state pension in line with wages next year - minister

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Britain's Work and Pensions Secretary Therese Coffey outside Downing Street in London, Britain March 17, 2020. REUTERS/Henry Nicholls

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LONDON, Sept 7 (Reuters) - Britain will not raise state retirement pensions in line with wages next year, but will instead increase them by the rate of inflation or 2.5%, whichever is higher, work and pensions minister Therese Coffey said on Tuesday.

Coffey told parliament she would introduce legislation to temporarily override a "triple-lock" formula which would have seen state pensions rise by 8% or more next year, due to what she called an "irregular statistical spike" in earnings caused by the COVID-19 pandemic.

"For 2022-23 it will ensure the basic and new state pensions increase by 2.5% or in line with inflation, which is expected to be the higher figure this year," she said.

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The triple lock would return from 2023-24, she added.

Prime Minister Boris Johnson promised in December 2019 election campaign to keep a 'triple lock' on state pensions which would rise by the highest of earnings, inflation or 2.5%.

The promise did not specify what measure of wage growth would be used, but the one which has been used in the past - average weekly earnings published by the Office for National Statistics - has been heavily distorted during the pandemic.

Average weekly earnings showed annual growth of 8.8% in the three months to June, but the underlying rate absent these distortions was more like 3.5%-4.9%, the ONS said last month.

Most workers who were on furlough a year ago are now back at work, and so are now receiving full pay rather than reduced furlough wages. Job losses were mostly among the lower paid - artificially boosting average pay levels among those remaining.

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Reporting by David Milliken Editing by William Schomberg and Michael Holden

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