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Double-digit state pension rise up in the air as triple lock in doubt

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27/10/2022
Retirees were expecting a double-digit state pension rise in 2023 but this has once again been cast into doubt in the latest twist to the pension triple lock saga.

Just before her departure, former Prime Minister Liz Truss confirmed the pension triple lock would be protected after days of speculation it could be scrapped to plug the government’s funding black hole.

Under the pension triple lock mechanism, it guarantees the basic state pension will rise by the higher of average earnings, inflation or 2.5%.

As it’s based on the September inflation figure – which came in at 10.1% – retirees breathed a sigh of relief that Truss reaffirmed her commitment to the pension triple lock.

After all, the double-digit state pension increase for April 2023 represented the biggest ever rise, and for some, it would mean their retirement income would breach £10,000 a year for the first time.

But with a new Prime Minister and with a government priority to cut costs, Rishi Sunak may be forced to ditch this measure once more.

Sunak as the previous Chancellor broke the 2019 Conservative manifesto by scrapping it for April 2022 due to distortions created by the pandemic which would have seen retirees receive big increases in their retirement income.

However, in June 2022, he defended his decision to reinstate the pension triple lock next year as inflation soared to a 40-year high, stating that vulnerable, older people needed to be protected.

But yesterday, the Treasury announced that the Autumn Statement – dubbed the Halloween Budget – would be pushed back from 31 October to 17 November 2022.

In the meantime, the government said it won’t make any commitments ahead of this date.

‘Too tough to call’

Steven Cameron, pensions director at Aegon, said: “The eventual outcome after so many twists and turns is too tough to call. On the one hand, Sunak has said he is seeking to deliver confidence and security, but further uncertainty over the triple lock offers neither to state pensioners.

“He has also said he’ll honour manifesto commitments, which included the triple lock, although the earnings component was suspended last April.

“On the other hand, no one doubts the hugely difficult challenges the government faces in balancing the books and today’s state pensions are paid from the National Insurance collected from today’s workers, not from some huge accumulated pot.

“Those pensioners heavily or totally reliant on the state pension are most at risk here, highlighting the benefits to today’s workers of making the most of workplace pensions.”

Potential pension triple lock income in 2023

Calculations by Aegon suggest if the pension triple lock is honoured next year, retirees will see the following changes to their income (rounded up to the nearest 5p):

  • Full flat-rate state pension (paid to those reaching state pension age from 6 April 2016): Increase from £185.15 per week to £203.85 per week. That’s £10,600 per year.
  • Full basic state pension (paid to those who reached state pension age before 6 April 2016): Increase from £141.85 per week to £156.20 per week. That’s £8,122.40 a year.

 

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