Furious OAP rages at triple lock broken promise
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While it remains unclear whether the triple lock will be reinstated next year, pensioners should still expect to see an increase in their state pension in April. The increase is usually calculated using the highest figure out of inflation, wage increases, and 2.5 percent, but the metric could be reduced to a “double lock” if the Government discounts inflation, like it discounted wages last year.
For a decade, the state pension has risen in line with the triple lock in a bid for it to maintain its “real value”.
However, there was a temporary suspension of this metric for the years 2022-23 following an abnormal rise in wage inflation (8.3 percent), compounded by the pandemic.
According to the former secretary of state for work and pensions, Thérèse Coffey, the one-year adjustment to the triple lock was necessary to stop pensioners “unfairly benefiting from a statistical anomaly”, and the policy would be reintroduced next year.
But with a new Prime Minister and cabinet – as well as increasing inflationary pressures – uncertainty on whether this will remain prevails.
New PM Rishi Sunak was asked whether he would commit to the policy next April, to which his press secretary has recently said: “That is something that is going to be wrapped up into the fiscal statement, we wouldn’t comment ahead of any fiscal statements or budgets.
“But what I can say is he has shown through his record as chancellor that he will do what’s right and be compassionate for the most vulnerable.”
So, what rates could state pensioners expect to see next year, through a triple or a double lock increase?
Triple lock rates 2023
If the triple lock is honoured in April 2023, it will see state pensions rise by the highest figure out of inflation, wage increases, or 2.5 percent taken from the previous September.
The latest Consumer Price Index (CPI) report inflation rates hit a staggering 10.1 percent in the year to September 2022, far exceeding the other two metrics. This would mean the state pension would see an increase of 10.1 percent.
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According to investment company AJ Bell, the full-rate state pension, which is paid to those who reached state pension age from April 6, 2016, will increase from £185.15 per week to £203.85 per week (£10,600.20 per year) from April next year.
The basic state pension, which is paid to those who reached the state pension age before April 6, 2016, will increase from £141.85 per week to £156.20 per week (£8,122.40 per year).
Double lock rates 2023
If the Government chooses not to reinstate the triple lock and takes the same metric as last year following the “abnormal” wage inflation, the rate could be calculated using the highest number out of wage growth and 2.5 percent.
Wage growth for the three months to July hit 5.5 percent, which would be the amount the state pension would rise by, as it makes it the highest metric to the 2.5 percent.
So, according to AJ Bell, if earnings growth of 5.5 percent is used instead:
The full-flat rate state pension would rise to £195.35 per week, which amounts to £8.50 per week (or £442 per year) less than a 10.1 percent inflation-linked increase.
The basic state pension would rise to £149.65 per week, amounting to £6.55 per week (or £340.60 per year), less than the inflation-linked increase.
In terms of the extra number, if the wage growth metric was also scrapped and the state pension only rises by 2.5 percent, the following rates could apply:
The full flat-rate state pension would increase to £189.80 per week, which amounts to £9,869.60 per year.
The basic state pension would increase to £145.40 per week, amounting to £7,560.80 per year.
Tom Selby, head of retirement policy at AJ Bell, commented: “If the triple-lock was meant to provide retirees with retirement income security and certainty, it is hard to argue that has been the case for the last two years.
“The earnings element of the triple-lock was axed for this year’s increase after a spike in average wages last year, while the inflation element has come under threat for next year’s increase after CPI came in at over 10 percent in September.
“Pensioners need clarity from the new Prime Minister over what the state pension is likely to rise by next year, so they have the certainty to plan ahead of a difficult winter.
“While Sunak’s predecessor, Liz Truss, committed to the triple lock in what turned out to be her final Prime Minister’s Questions, the chancellor, Jeremy Hunt, had pointedly refused to do so before her intervention. Given the current focus on fiscal conservatism, it is hard to be absolutely confident whether or not Truss’ triple lock commitment will be retained by Sunak.”
Mr Selby continued: “The impact of the decision will be huge for retirees. Increasing the full flat-rate state pension in line with September’s 10.1 percent inflation figure would push it to £203.85 per week.
“If this element of the triple-lock is abandoned and average earnings growth of 5.5 percent is used instead, however, the figure will be £195.35 per week.
“That equates to a £442 gap in income over the course of the year – an amount which could make a huge difference to older people struggling with rising energy bills.
“In terms of costs to the Exchequer, the difference between an earnings link and an inflation link is likely to be £4-5billion.
“But part of the political challenge here is in relation to benefits too – if the state pension increases in line with inflation, can the new Prime Minister justify ‘only’ increasing benefits in line with earnings? If he does, complaints about intergenerational unfairness will inevitably intensify.
“Over the longer term, the Government needs to review the triple lock and decide exactly what it is trying to achieve. Currently, it provides real-term increases in the value of the state pension at random intervals, and it has become clear that there is a limit to the amount the Exchequer is willing to shell out on pensioner incomes.
“If the Government really wants to increase the state pension, it should set out its case and a trajectory for reaching that goal.”
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