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Pension triple lock safe for now: Retirees set for biggest ever income rise

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Retirees are set to receive a 10.1% increase to their state pension next year after the Prime Minister confirmed the triple lock will be protected, following days of speculation over its future.

The Prime Minister, Liz Truss, today confirmed she will protect the pension triple lock, following concerns it would be scrapped to plug a big government fiscal black hole.

At this afternoon’s Prime Minister’s Questions, Ian Blackford, MP, and leader of the Scottish National Party, asked: “After 10 U-tuns in two weeks, families are paying through their teeth for her [Liz Truss] mistakes.

“Her latest broken promise has put pensioners in the front line of Tory cuts. So, can the Prime Minister get permission from the Chancellor to make another U-turn and commit to raising the state pension at the rate of inflation?”

In her response, Truss, said: “We have been clear, in our manifesto that we will maintain the pension triple lock and I am completely committed to it, so is the Chancellor.”

She added: “I have been clear we are committed to protecting the pension triple lock”.

State pensions to keep pace with inflation

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 today was recorded as 10.1% – retirees can now expect a double-digit state pension increase in April 2023 – the biggest ever rise and the first time the state pension has come above £10,000 a year.

It comes after the future of the divisive pension triple lock mechanism was cast into doubt as new Chancellor Jeremy Hunt axed nearly all of his predecessor’s disastrous mini Budget tax cuts.

The triple lock was ditched for April 2022 – breaking the Conservative manifesto – due to distortions created by the pandemic which would have seen retirees receive big increases in their retirement income. However, previous Chancellor Rishi Sunak committed to reinstate it and Truss also made the same pledge during her leadership contest.

But, with the triple lock set to cost the government around £21bn over the next three years, and amid the market mayhem in the aftermath of the mini Budget, scrapping it would fill a large chunk of the government’s deficit.

It would also be fairer to the working classes as working-age benefits are hit with real terms cut.

All in all, the 10.1% rise in state pensions means retirees can expect the following incomes in April 2023, according to calculations by Aegon:

  • 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.

‘Ripe for the chopping block’

Jon Greer, head of retirement policy at Quilter, said: “The government appear to be struggling to have a committed stance on the triple lock uprate in pensions, with Liz Truss now claiming pensions will rise by inflation. Given the sums involved it is ripe for the chopping block for a Chancellor who has made it clear that spending cuts are going to be required if we are to balance the books.

“Clearly this isn’t palatable for Liz Truss and she will be acutely aware of the political consequences this has for a Conservative Party that has traditionally relied upon the older vote. There are fears though that by sticking with the triple lock and raising the state pension in line with inflation, further intergenerational inequality will be created. Inflation is now running at almost double the earnings growth of working people, and during a cost-of-living crisis this will have a considerable impact on the finances of those people who are already struggling.

“That said, there are also a vast number of pensioners facing some difficult decisions this winter and have no choice but to be beholden to decisions made by the state, whereas working people can more easily influence their own earnings. Many pensioners need and will welcome a rise by inflation, provided the policy is not brought back into scope for cutting.”

Greer added that as the pension triple lock “does not work for everyone”, there may need to be a fairer way to raise the state pension while preventing more people “slipping into the poverty net and having to choose between heating or eating”.

He said: “The intransigence on suggested changes to the pension uprating mechanism, such as those put forward by the Work and Pensions select committee to replace the triple lock with an earnings link with allowance for periods of high inflation – some six years ago now – has exacerbated this political headache.”

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