What is the pension triple lock? Meaning of UK government guarantee on state pensions - and is it under threat
Pensioners could receive more than £200 a week if the pension triple lock returns next year
Millions of people could see their state pension rise to more than £200 per week from next year, experts say.
Prime Minister Liz Truss has promised to bring back the triple lock system, which sees pensions rise in line with the previous September’s highest inflation rate, wage growth figures, or by 2.5%.
The triple lock was paused last year and a “double lock” removed wages when working out the increase, meaning the state pension went up in April by 3.1% - the rate of inflation at the time.
If the triple lock returns it is likely that pension payments will be linked to inflation, meaning pensioners could be in line for a significant boost.
Helen Morrisey, senior pensions and retirement analyst at financial services company Hargreaves Lansdown, told The Sun: “Inflation eased this month, but it still remains sky high and looks set to stay so for the foreseeable future.
"This means pensioners are in line for a significant pension boost next year as long as the government keeps its pledge to keep the triple lock.
"If the link to Consumer Price Index remains, then we could see pensioners on a full new state pension get more than £200 per week."
Here’s what you need to know about the triple lock system, how it works and why was it under threat? Here’s what you need to know.
What is the pension triple lock?
The triple lock on pensions is a guarantee from the UK government to increase the state pension by whichever is highest out of inflation, earnings or 2.5 per cent.
It is a safeguard to ensure that the state pension doesn’t lose value over the years because of rising inflation, meaning an increase in the cost of living and goods.
The three factors involved in measuring state pension increases are:
- average earnings
- inflation based on the Consumer Price Index (CPI)
- 2.5 per cent
It was introduced in 2010 so that the state pension would maintain its real terms value but has been much talked about in recent times due to slow growth in earnings and inflation.
It means that pensioners will get a minimum 2.5 per cent increase year on year, strengthening the spending power of people in receipt of the state pension.
Is the pension triple lock under threat?
Since the triple lock on pensions was introduced, the state pension has increased 35 per cent while average earnings have risen by 27 per cent, reports the i newspaper.
The balancing act comes as the state pension was seen to be neglected for many years before a guarantee was introduced in 2010 to ensure its value was maintained.
Yet the mounting costs of the Covid pandemic has the government in a tricky position, with many people already seeing a rise in their national insurance contributions and removal of the universal credit uplift.
Prime Minister Liz Truss has promised no changes to the triple lock, but according to The Express, experts say it is not sustainable.
Carl Emmerson, of research group the Institute of Fiscal Studies, warned: “The triple lock is expensive over the long run and therefore will need to be ditched at some point.
“CPI indexation of the state pension in April 2023 and April 2024 - which will be a big cash increase - is defensible.
"It is just a question of whether the resulting increase in the state pension as a share of earnings should be locked in permanently.
“This is clearly not sustainable, particularly amid the current economic downturn.”