The pensions industry has welcomed the Chancellor’s decision to retain the triple lock, despite pressure to ditch the inflation-linked element to help balance the nation’s finances.
Hymans Robertson partner Chris Noon says that there was “welcome relief” that the government had stuck to its manifesto promise regarding the triple lock.
He adds: “With the cost of living crisis and rising inflation set to continue, too many pensioners continue to live on extremely low incomes leading to evermore worry for many.
“The UK State Pension is one of the worst in the OECD and is the primary reason that the UK has such high levels of pensioner poverty. The triple lock provides long-term mechanism for increasing the state pension relative to other wealthy countries and must be retained for the long-term.”
The triple lock – which ensures the state pension is raised each year by whatever is greatest, annual earnings, inflation of 2.5 per cent — means that the state pension will be uprated by 10.1 per cent in April, the largest increase since this protection was put in place. For those reaching state pension age from 6 April 2016 this will mean a weekly income of £203.85, or £10,600.20 per year as a result
Meanwhile head of retirement policy Jon Green says: “Chancellor Jeremy Hunt has finally put the rumours to rest and confirmed that the government will honour its manifesto promise of keeping the triple lock in place for the 2023-24 tax year.
“Pensioners suffered a miserly 3.1 per cent increase in the state pension in April 2022 after the triple lock was scrapped last year following an anomalous rise in earnings and have increasingly struggled to make ends meet as inflation continued to rise and their purchasing power was diminished.”
Greer adds: “Committing to the triple lock will be extremely costly to the Treasury, but given soaring inflation, the alternative would have been too politically damaging.”
The government may face similar issues next year, he said, with the Bank of England predicting inflation to still be running at 7.9 per cent in quarter three of next year. “Perhaps it is time the government assessed whether there is a fairer way to raise the state pension going forward, while preventing more people slipping into the poverty net and having to choose between heating or eating.”
Aegon’s pensions director Steven Cameron agreed that there remained a “huge question” whether the triple lock will remain as a long-term feature of the pensions landscape. He said that given its cost it is hard to imagine it appearing in future election manifestos.
Cameron says: “In volatile times, using an average over 3 years or even paying out the average of inflation and earnings increases each year might be more sustainable for Government and predictable for pensioners.
“The outcome of the review of state pension age is also to be published early in 2023 and on affordability grounds, this needs to be considered alongside the future of the triple lock.”
He adds that the confirmation that the triple lock will continue means pensioners can “breathe a huge sigh of relief” after what he describes as a white knuckle roller coaster ride” of disappointment, promises and u-turns in recent weeks over the fate of this year’s triple lock.
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