September’s inflation figure is published next week, at which point pensioners will find out how much State Pension increase they will get. This will be lower than the 8.3 percent they would have received if the Government had kept the State Pension triple lock in place. Next year could bring more bad news.
The triple lock pledges to increase the State Pension either by earnings, inflation or 2.5 percent a year, whichever is higher.
However, the Government broke its own manifesto commitment and suspended the earnings element this year, as wages rebounded sharply from the pandemic.
Otherwise it would have given pensioners a pay rise of 8.3 percent, worth an extra £14.90 a week for those on the new State Pension – or £774.80 a year in total.
Those on the basic State Pension would have got an extra £11.42 a week, worth £593.84 a year.
Next week’s figure is likely to be notably lower, so the move to replace the triple lock with a double lock may cost pensioners hundreds of pounds a year.
It could happen again.
Tax experts are warning the cash-strapped Treasury may be forced to suspend the triple lock for the second year in a row.
Raj Mody, global head of pensions at PwC, suggested that as wages and inflation rise in the wake of the pandemic, the mechanism may prove too expensive.
He said: “The Government has already announced the suspension of the triple lock guarantee on State Pensions. We might see similar action again next year if current wage patterns carry on.”
Mody is not the only pensions expert to be concerned.
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Altmann slammed the decision to scrap the triple lock this year, saying it betrayed the poorest pensioners and was also unnecessary.
“I agree that an 8.3 percent rise would be difficult to accept, but the Department for Work & Pensions could have used an adjusted average earnings figure, which would have given pensioners a pay rise of 3.5 percent.”
Altmann said the UK State Pension is already the lowest in the developed world and still below 1979 levels in real terms.
A Department for Work and Pensions spokesperson replied that comparing state pensions internationally is misleading, as the UK offers additional benefits such as Pension Credit. “The DWP expects to spend more than £125billion on benefits for pensioners in 2020/21.”