Published On: Fri, Feb 18th, 2022

State pension triple lock promise ‘unlikely’ to be kept | Personal Finance | Finance

The state pension may be set for a huge upgrade in April 2023, unless the Government decides to suspend the triple lock policy for a second year. Pensioners will already receive a cut-price increase this year.

Emma Watson, head of financial planning & advisory services at Rathbone Investment Management, explained how the triple lock has traditionally been implemented.

She said: “The triple lock is a pledge that the state pension will increase each year in line with either average earnings, the annual inflation rate or 2.5 percent – whichever is higher.

“The measurement of earnings and inflation is taken the previous September, confirmed in the new year and takes effect at the start of the next tax year on April 6.”

A change to the triple lock policy was made for the 2022/23 tax year which denied pensioners an increase of 8.1 percent to their state pension.

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A 3.1 percent increase will mean the full new state pension rises by £5.55 per week, taking it from £179.60 to £185.15

The full basic state pension on the other hand will increase from £137.60 to £141.85, an extra £4.25 a week.

But since the increase was locked in back in September 2021, inflation has surged to a 30-year high, and currently sits at 5.5 percent, well ahead of the scheduled state pension boost to come in less than two months.

Pensioners may have taken a crumb of comfort from the idea that if inflation continues to stay at a high level between now and September 2022, the 2023/24 state pension increase could be a bumper one.

However, speculation has already begun around whether the Chancellor of the Exchequer, Rishi Sunak, will once again decide not to honour the triple lock policy next year.

Ms Watson explained: “With inflation still rising, as we approach March’s spring statement, we find ourselves in a déjà vu moment as speculations of the triple lock being scrapped pick up once again.

“Indeed, with the Bank of England estimating that inflation could peak to as much as eight percent by April, the triple lock seems like a very expensive and unlikely promise to keep.

“The Chancellor faces a difficult decision once again.”

With millions of Britons struggling financially due to the effects of the pandemic, Ms Watson believes a large state pension increase may not be well received by taxpayers, but could be vital to ensuring older people are protected.

She said: “Much has been said about the economic impact on different generations with the millennials again being those hardest hit with job losses during the pandemic, soaring house prices and wage inflation struggling to match the rising cost of living.

“Giving the ‘baby boomers’ a healthy rise at such a time could prove very unpopular.

“However, with an estimated two million pensioners living below the poverty line, and many relying on the state pension as their only source of income, there is a need to protect Britain’s poorest and least able to earn from steeply rising prices.

“So while the financial fate of the most vulnerable members of our society hangs in the balance, all eyes will be on Sunak as we head closer to the Spring Statement in March.”

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