Triple lock changes
Previously, state pension incomes were somewhat protected by the triple lock, which ensured payments rose every year by the highest of 2.5 percent, inflation as measured by the CPI or averaged earnings. However, in recent months the Government proposed suspending the triple lock on state pensions for one year, after earnings growth figures came in artificially high at 8.3 percent as a result of the pandemic.
As such, a “double lock” was proposed which would result in pensions increasing by CPI inflation of 3.1 percent. While still an increase, the rises are set to be overshadowed by worrying inflation rates, which the Bank of England predicts could be as high as five percent over the coming months.
Yesterday, The House of Commons rejected proposed amendments from the House of Lords to retain the state pension triple lock next year. Helen Morrissey, a senior pensions and retirement analyst at Hargreaves Lansdown, commented on the difficult debate.
“The House of Lords’ proposed changes to keep the state pension triple lock were rejected in the Commons but not without a lot of drama along the way,” she said.
“There were fiery exchanges between the pension minister Guy Opperman and a number of MPs including the head of the Work and Pensions select committee Stephen Timms, who argued that pensioner poverty is already on the rise and that even a one-year break in the earnings link risks long-term damage.
“While an 8.3 percent increase in the state pension looks generous in the wake of earnings figures distorted by the pandemic it’s also fair to say the alternative of 3.1 percent offers little comfort in the face of rapidly rising inflation. The suggestion that an earnings figure could be used that strips out the distorting impact of the pandemic was rejected by the pension minister who said it was difficult to find a figure that was sufficiently robust.