The triple lock on the state pension will be temporarily suspended next year due to an anticipated “unusual change in earnings” of 8%, saving the Treasury £4bn, Work and Pensions Secretary Therese Coffey has announced.
Introduced in 2010, the new formula source state pension increase in line with the highest rate amongst three economic indicators: -
A base level of 2.5%;
Inflation, as measured by the Consumer Prices Index (CPI);
The average wage increase.
For the 2022/23 tax year, pensions will rise either by 2.5% or inflation, whichever is highest breaking a Conservative manifesto triple lock pledge that said state pensions would also grow in line with wage growth if that was the highest.
Parliament will first need to approve the change through though, with the exact rise likely to be confirmed in October.
Coffey said the move would ensure “Pensioners are not unfairly benefiting from a statistical anomaly”, given that wage growth has been artificially boosted by the thousands of workers coming off the furlough scheme and returning to payroll.
The maximum offered by the basic state pension is £137.60 a week, while the new state pension is £179.60 a week.
As far back as April 2020, the Social Market Foundation was calling for a “double lock” on pensions, arguing that “shaving £4bn from the growth of the £100bn pension bill Is not too much to ask” as the country emerged from the COVID-19 crisis with a mounting annual deficit.
State pension should still rise by at least 2.5%
If the earnings element of the triple lock is set aside, the state pension is set to increase by the higher of 2.5% or September's consumer price index (CPI) inflation figure, which will be published next month.
What does the government say?
In a statement published on Gov.uk, the Department for Work and Pensions said :
“Younger people have been hit hardest by the financial impacts of the pandemic, and the artificial inflation of pensioner incomes at this time would be out of kilter with the pressures being experienced by the rest of the population.”
“This legislation makes sure pensioners spending power is preserved and they're protected from higher costs of living, whilst ensuring they are not unfairly benefiting from a statistical anomaly.”