State pension alert as triple lock suspension means Britons to suffer £2,500 income ‘hit’ | Personal Finance | Finance
The state pension triple lock has been temporarily scrapped in favour of a double lock policy. As a result of warped earnings data due to COVID-19, it was deemed too expensive for the Government to maintain the policy.
Therefore, this year, pensioners can expect an increase of 3.1 percent to their state pension.
The triple lock is a policy designed to protect pensioners’ income in real terms.
Usually, the state pension will rise by the highest of 2.5 percent, average earnings, or inflation.
But many pensioners are frustrated by the fact they will not be able to secure an 8.3 percent rise as was previously predicted.
READ MORE: Pensioners could boost their retirement income by £3,000 per year
The impact on pensioner incomes is likely to be stark as a result of the decision to temporarily suspend the triple lock.
This was touched upon by Tom Selby, head of retirement policy at AJ Bell, who appeared at a webinar hosted by the National Pensioners Convention today.
He explained: “There is a difference between what the state pension is going to be through a 3.1 percent increase, and what it would’ve been if you increased it in line with average earnings as the triple lock would have demanded had it not been removed.
“The basic state pension would’ve increased to £149 per week, rather than £141.85. The full flat rate state pension would have increased to £194.50 per week, rather than £185.15.
DON’T MISS
State pension for married women set to increase this year [INSIGHT]
‘Think of the future!’ Rishi Sunak urged to maintain triple lock [ANALYSIS]
Pension alert as Britons forced to wait an extra two years for cash [EXPLAINED]
“So that’s a significant amount of money when you look at it over the course of the year.”
Mr Selby estimates this is around £370 lost for those who receive the basic state pension, while for those in receipt of the full new state pension, there is an approximate loss of £486.
He continued: “Of course, that impact will be felt over time, because each increase that is applied from next year onwards will be to a figure lower than it would otherwise have been.
“If you look at the flat rate state pension over the course of five years in total income, if the state pension increased by five percent each year after this year’s increase they would have been taking home just shy of £56,000.
“But because of the decision to axe the triple lock they will actually be taking home over that period, if the sum increases by five percent each year, around £53,000.
“You’re talking about a £2,500 hit to people’s incomes over five years.”
However, this could have a major impact over the course of a person’s retirement.
As life expectancy generally increases, people will be spending more time in retirement than ever before.
Mr Selby added the hit could be substantially more when thinking about a retirement which could last 20 to 30 years.
Recently, Jan Shortt, General Secretary of the National Pensioners’ Convention, told Express.co.uk: “Our members tell us they are terrified of hefty bills for food and heating – with worse to come, and just a paltry increase in their state pensions come April.
“This is a shameful way to treat our oldest and most vulnerable.
“But there is still time for the government to help them by reversing its decision to suspend the triple lock and give our members a decent increase that goes at least some way towards meeting the rise in inflation.”
A DWP spokesperson previously told Express.co.uk: “We want pensioners to receive all the support to which they are entitled. Our winter fuel payments are supporting over 11 million pensioners with their energy bills and we are continuing to encourage those eligible for Pension Credit, and the wide range of other benefits it can provide, to make a claim.
“The one-year move to temporarily suspend the triple lock ensures fairness for both pensioners and taxpayers.
“Combined with last year’s 2.5 percent increase to pensions – a step we took when earnings fell and inflation barely rose – we have ensured pensioners’ incomes have been protected.”
