What is the pension triple lock? Meaning of UK government guarantee on state pensions - and is it under threat

Pensioners calling for winter fuel payment increase amid rising costs and threat to pension triple lock

Campaigners on behalf of pensioners are calling for winter fuel payments to be increased due to rising energy prices.

The cost of global fossil fuels is expected to rise in the months ahead as the UK prepares for winter - increasing energy bills.

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Around 15 million households will see their annual energy bill rise by £130 at a time when the triple lock on pensions is under threat.

Rising energy costs, food prices and the threat to the pension triple lock could see pensioners worse off, warn campaign group Silver Voices.

It proposes that the winter fuel payment, currently between £100 and £300 a year for pensioners, be index-linked to rising energy prices.

In response, the government has said it is "committed to supporting low income and vulnerable households to keep warm during the colder months".

What is the winter fuel payment?

The winter fuel payment is a tax free state benefit paid annually to help with heating costs.

Most payments are made between November and December and are paid to those in receipt of the UK state pension.

Others qualify for the winter fuel payment if they were born on or before 26 September 1955, though this date changes each year.

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.

Why 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 national insurance contributions set to rise and the removal of the universal credit uplift.

The furlough scheme has distorted wages over the past 18 months, meaning if the pension triple lock was to be imposed pensioners could see a rise of around 8 per cent.

Not only would this cost the UK government in excess of £3 billion but it would also be difficult to defend from a political standing, at a time workers are expected to pay more in taxes.

Will the pension triple lock remain?

With parliament back this week after the summer break, a wave of new measures are set to be introduced to help pay for the costs of the Covid pandemic.

Pensioners wait to see what this will mean for the triple lock - and the promise the government made in its Conservative Party manifesto for the 2019 general election.

Chancellor Rishi Sunak is debating a number of options, one of which would see a temporary double lock by removing the earnings piece of the triple lock equation.

This would mean that the state pension increase would be calculated based on the two remaining pieces - inflation or 2.5 per cent - whichever is highest.

How long the temporary change to how pensions are calculated will form part of Sunak’s legacy and could even play a major role in the way people vote come the next election.