Triple lock suspension ‘eroded’ state pension – could it happen again? | Personal Finance | Finance
If the triple lock policy had been implemented as normal, British pensioners would be receiving a bumper state pension boost next month. The suspension of the triple lock has cut this increase by more than half.
The state pension was on course to rise by a massive 8.1 percent from April 2022, by far the largest increase in the history of the triple lock.
However, the triple lock policy has been temporarily suspended for the 2022/23 tax year, lowering the increase to just 3.1 percent.
The triple lock policy is a Government guarantee which ensures pensioners are able to maintain their spending power as the cost of living rises.
Under the terms of the policy, the state pension must rise by the highest of the following figures:
- 2.5 percent
- The rate of inflation
- Average earnings growth.
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Anna Murdock, Head of Wealth Planning at JM Finn, spoke exclusively to Express.co.uk and explained the thinking behind the Government’s decision.
She said the concept of an 8.1 percent rise was an “unaffordable scenario” for the Government, which would likely have cost billions of pounds.
Since the 3.1 percent rise was confirmed, inflation has continued to surge to astronomical levels. The current rate of 5.5 percent is a 30-year high.
This has meant many pensioners have struggled to make their income stretch as the cost of living has risen. There is a belief that inflation could continue to skyrocket in the coming months.
Ms Murdock said: “With inflation expected to be roughly 7.25 percent in April 2022, those receiving their state pension will be losing money in real terms.
“The spending power of their state pension income will be eroded.”
If inflation does keep rising all the way to September, when next year’s state pension rise will be confirmed, pensioners could be set for a large increase in their income from April 2023.
This has led some people to question whether the Government will once again make an amendment to the triple lock policy next year, reducing the increase for a second consecutive year.
Ms Murdock concluded: “The triple lock has long been criticised, mainly because some economists believe it to be too expensive to maintain.
“The Department for Work and Pensions estimates the total state pension bill for 2021/22 will be £104.86billion, a jump from £69.83billion in 2010, before the triple lock was implemented.
“It’s hard to say whether or not the triple lock will be scrapped, but its affordability in the long term is a point of concern.
“Regardless of these fears, the Government has still maintained the suspension is only temporary and that the triple lock will return the following year.”
A Department for Work and Pensions (DWP) spokesperson, recently told Express.co.uk: “The one-year move to temporarily suspend the triple lock ensures fairness for both pensioners and taxpayers, and follows action we took last year to protect pensioner incomes.
“We know this has been a challenging time for many people, which is why we’re providing support worth around £12billion this financial year and next to help households across the country with the cost of living. A further £9billion was recently announced by the Chancellor to protect against the impact of rising global energy prices.”
