What is the triple lock pension and will it be scrapped?

Ex-chancellor Rishi Sunak’s budget contained a whole load of changes that will affect everybody’s wallet – with some areas of the economy set to benefit, but others set to lose out.

And since then, there has been more bad news as the Bank of England has revealed the UK is already in a recession with GDP falling and interest rates at the highest in over a decade.

Interest rates have been raised to 2.25% from 1.75% – the highest level since November 2008.

Some things changed with this week’s mini-budget delivered by new Chancellor of the Exchequer Kwasi Kwarteng

It included massive changes to parts of the UK economy, including an energy price guarantee that will limit bills for the average household to £2,500, saving households on average £1,000 a year.

However, one thing that was not addressed that changed back in June was the suspension of the ‘triple lock’ format on state pensions.

But just what is the triple lock pension and what happened to it?

What is the triple lock pension?

The triple lock is a commitment that state pensions would rise by whichever was the largest of three figures – annual inflation, average earnings rises or by 2.5%.

With this in mind, pension recipients could have expected an 8% rise in their weekly payments next year – especially useful in times of pandemic uncertainty.

However, the former Department of Work and Pensions minister, Therese Coffey, announced earlier this year that the government would not be adhering to this proposal, and would decide on pensions based on annual inflation or by 2.5%.

Why was the triple lock pension scrapped?

Although the concept of a triple lock pension was a part of the Conservatives’ manifesto, the choice not to consider annual earnings was made to prevent those who were expecting to receive a pension ‘unfairly benefitting from a statistical anomaly’.

The past year saw a rise in annual earnings after millions of people saw their wages fall 20% while they were on furlough.

However, Coffey went on to state that the triple lock will return as usual in 2022: ‘We can and will apply the triple lock as usual from next year for the remainder of this Parliament, in line with our manifesto commitment.’

What is the current state pension worth?

The full, current flat-rate state pension (for those who reached state pension age after April 2016) is £179.60 a week.

The full, old basic state pension (for those who reached state pension age before April 2016) is £137.60 a week.

From April 2022 this will rise by 3.1% in line with inflation – meaning those who are entitled to the new flat-rate pension will receive £185.15 a week.

Basic state pension will rise to £141.85.

Will the triple lock stay in place once it comes back?

Though the government has stated that the agreement will return in due course, some are sceptical that it’ll be an arrangement that can continue in the long term.

James Andrews, senior personal finance editor at money.co.uk, has predicted that ‘more change’ is on the way, regardless of the promises made: ‘It’s quite simply mathematically impossible to maintain the triple lock indefinitely, with the promise guaranteeing pensions will cost the Government more and more every year regardless of what happens to the taxes coming in.

‘A single year’s suspension might cover a statistical anomaly, but it does nothing to answer the bigger question.’

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