Liz Truss has moved to reassure millions of people worried about the triple lock on pensions.
In response to questioning at today’s PMQs, the prime minister attempted to clear up confusion around the state pensions guarantee, which was paused last year following the Covid pandemic. A ‘double lock’ removed wages from the three pronged equation which sees pensions rise by whichever is highest out of the previous September’s highest inflation rate, wage growth figures, or by 2.5%.
It meant that pensions were increased by 3.1%, in line with inflation at the time, but the triple lock is central to the 2019 Conservative manifesto and was a commitment Ms Truss made during her leadership campaign. Yet with a series of U-turns - and sacking of Kwasi Kwarteng as chancellor - pressure on the prime minister has continued to mount just weeks after she took office in Downing Street.
Pensioners looking for reassurance at a time when the cost of living continues to spiral were handed some comfort ahead of this winter when Ms Truss, in response to Ian Blackford in the House of Commons today (19 October 2022), said: “We have been clear in our manifesto that we will maintain a triple lock and I am completely committed to it, and so is the chancellor.”
Here’s what you need to know about the triple lock system, how it works and why it is under threat?
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 having seen a rise in national insurance contributions and removal of the universal credit uplift. After many experts thought it was unsustainable, Truss is no longer standing by her commitment to increase state pensions in line with soaring inflation.
Downing Street indicated ministers could ditch their commitment to the triple lock as new Chancellor Jeremy Hunt searches to plug a multi-billion pound black hole. Mr Hunt told colleagues at a Cabinet meeting on Tuesday that they must find savings from their departmental budgets.
As recently as October 2, Ms Truss was clear state pensions would increase in April by whichever is highest – 2.5%, wages or inflation. “I’ve committed to the triple lock. Yes,” she said in a BBC interview.
But, after replacing Kwasi Kwarteng in the Treasury after their disastrous mini-budget, Downing Street backed down on this pledge.
The Prime Minister’s official spokesman said: “We are very aware of how many vulnerable pensioners there are and indeed our priority ahead of this fiscal plan is we continue to protect the most vulnerable in society. The Prime Minister and the Chancellor are not making any commitments on individual policy areas at this point, but as I say the decisions will be made through the prism of what matters most to the most vulnerable.”
Moving to review the pledge was a “mutual decision” by Ms Truss and Mr Hunt, according to the official, who denied that the Prime Minister had been pressured into it by her new Chancellor.