The Chancellor of the Exchequer Jeremy Hunt has confirmed the return of the pensions triple lock, after its future was cast into doubt by former Prime Minister Liz Truss.
Announced as part of his 17 November autumn statement, Hunt’s move fulfils a Conservative Party manifesto commitment from the 2019 general election. It comes after the policy was suspended for the current financial year by Boris Johnson’s government.
This move led to a tough year for many pensioners as the state benefit only rose by 3.1% in April 2022 - a rate that counted for just a third of the rate of inflation at the time, and which has only become more of a real-terms cut as the year has gone on.
During Liz Truss’s administration, the former PM threw the expected April 2023 pensions hike into doubt after the extent of the UK’s dire economic outlook became clear. Truss and her Chancellor Kwasi Kwarteng delivered a mini budget that left a major black hole in the UK’s public finances, crashed the value of the pound and almost caused a run on pension funds.
So what is the pensions triple lock - and how much more money will pensioners get next spring? Here’s everything you need to know.
What is the pensions triple lock?
The pensions triple lock was a policy brought in by David Cameron’s Conservative/Liberal Democrat coalition government in 2010 and has been a key policy for Tory administrations ever since. It governs how much state pensions rise by and essentially guarantees that pensioners will never see their income fall.
As its name suggests, the triple lock has three things against which pension rises are guaranteed:
- Inflation (as measured by the Consumer Price Index (CPI))
- The average wage increase
State pensions will go up by whichever of these three things is highest, with all three mechanisms having been used since the policy’s introduction.
The triple lock was suspended for a year in September 2021 as the government feared Covid would lead to wage increases of 8.8% (incidentally, this is a much smaller figure than the heights CPI inflation has reached in 2022). This was because people were returning to full-time work having been placed on furlough - which lowered the average wage - during the pandemic.
For the 2022/2023 financial year, it meant the triple lock became a double lock - guaranteeing pensions against inflation or the 2.5% figure. This broke a 2019 Conservative manifesto promise to keep the triple lock in place for the duration of the Boris Johnson government’s term in office - a term that is set to continue for another two years, albeit without Johnson at the helm.
In March 2022, Department for Work and Pensions Secretary Therese Coffey confirmed the return of the triple lock for the next financial year, which begins in April 2023.
How much more money will pensioners get?
Inflation has soared since the rate for this year’s double lock pensions was announced and then implemented. This financial year’s rate of 3.1% is just over a third of the record May 2022 figure for inflation of 9.1%.
Basing figures on the full new state pension, pensioners currently receive 185.15 a week (an extra £5.55 per week or £288.60 a year compared to the year before). But when the 2022/23 financial year ends, pensioners are in line to receive a rise of 10.1% - £203.85 a week (an extra £18.70 a week and an additional £972.40 over the year).
This increase has come about because September’s CPI - which is used to determine many state benefits - was 10.1%. However, pensioners will not get this uplift until April 2023, meaning they face a tough winter with a deepening real-terms cut to their income.
While the rise has been welcomed, campaigners have also called for more support from the government. “The hard truth is that every day, our helpline hears from older people making dangerous cutbacks on heating and eating, and some tell us they are scared they won’t survive this winter,” said John Palmer, director of policy and communications at Independent Age.
“Currently, up to 850,000 older households don’t receive Pension Credit even though they are eligible for it. This group will now also miss out on the £900 cost of living payment announced by the government for those on means-tested benefits.
“For these people, today’s uprating of benefits will be meaningless unless the government commits to a Pension Credit uptake strategy. Without a strategy to ensure that those entitled receive their much-needed money, the government risks undermining today’s announcements.”