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‘Mistake’ to reinstate pension triple lock giving retirees 10% pay rise

Paloma Kubiak
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Paloma Kubiak

Retirees are on course to receive a double-digit increase to their state pension next year as the government confirmed it will go ahead with reinstating the triple lock.

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

As inflation has soared to a 40-year high of 9.1% for May and with forecasts by the Bank of England that it could reach 11% this autumn, it means retirees could be set for double-digit pension rises.

This is because the April 2023 increase is based on September’s inflation figure, which many predict will be around 10%.

And it comes at a time of strike action by workers who are calling for wage rises to cover the jump in inflation and rising cost of living.

Speaking to Sky News, the chancellor, Rishi Sunak, defended his decision to reinstate the pension triple lock after it was ditched for April 2022 rises due to distortions created by the pandemic.

When asked why pensioners are able to gain 10% rises but workers are warned against asking for 3% wage increases, Sunak said: “It is right that we reward our hard-working public sector workers with a pay rise but that needs to be proportionate and balanced with the need not to make inflationary pressures worse and also to see what’s affordable to the taxpayer.

“The slight difference with pensions is that pensions are not an input cost into the cost of producing goods and services that we consume, so they don’t add to inflation in the same way.”

The chancellor added that the pension pay rise is based on speculation ie what the inflation figure will be come September, and said the pension triple lock was developed to protect the vulnerable pensioners.

‘Not appropriate to raise pensions by the full amount’

However, professor Len Shackleton, labour market expert at think tank, the Institute of Economic Affairs, said reinstating the pension triple lock is a mistake.

He said: “It is difficult to call for wage restraint among the working age population while pensioners receive a big increase.

“Pensioners have already been partially compensated for energy price hikes and so it is probably not appropriate to raise pensions by the full amount of the CPI rise as the triple lock formula would require.

“It may be difficult politically to renege on the triple lock again, but we should bear in mind that pensioners as a group are less likely to be in poverty than, say, families with young children. Support for struggling households could be better targeted than giving all pensioners, many of whom are relatively well-off, a big increase.

“If we are requiring some degree of pay restraint and trying to hold the line on other areas of government spending, political commitments given in happier times cannot be regarded as absolute.”