What is the triple lock and what difference does it make to pensioners?
Here is a look at how the triple lock normally works and what difference it could make to pensioners.
– What does the triple lock do?
The triple lock guarantees that the state pension rises every year in line with inflation, earnings or 2.5% – whichever is highest. September’s inflation figure, at 10.1%, would normally be part of the calculation.
The policy helps to ensure pensioners’ living standards keep up with those of the wider population. More than 12 million people receive the state pension.
– What has happened to the triple lock?
The triple lock was previously paused for a year, as the coronavirus pandemic had distorted the wages element of the triple lock. Pensions rose by 3.1% this year.
– So what is happening now?
Prime Minister Liz Truss had previously stated she was committed to the triple lock.
However, there have been indications that ministers could ditch the commitment, with new Chancellor Jeremy Hunt searching for ways to plug a multi-billion pound black hole in the wake of the turmoil following the mini-budget.
– Why would axing the triple lock be controversial?
Politically, it could inflict further damage, following a string of recent policy u-turns. It was a Conservative manifesto pledge and its previous suspension had been viewed as a one-off due to the distorting impacts of the pandemic.
Ditching the promise would affect some of the most vulnerable people in society, many of whom live on fixed incomes, as high inflation wreaks havoc with household budgets.
However, some may make arguments around “intergenerational fairness”, with many working age people receiving pay rises well below the current rate of inflation.
– What impact would there be in cash terms if pensions rose in line with earnings next April instead of inflation?
If pensions rose by 5.5%, in line with earnings, the weekly new state pension would be £195.35. But if it rose in line with Consumer Prices Index (CPI) inflation, at 10.1% it would be £8.50 per week higher, at £203.85.
This would add up to a difference of £442 over the course of a year in pensioners’ pockets.