The government has confirmed that the ‘triple lock’ for annual State Pension increases is to be suspended for the 2022/23 tax year.
The triple lock guarantees that the State Pension will increase each year in line with the highest of inflation (as measured by the Consumer Prices Index), the average wage increase or 2.5%.
Introduced by the coalition government in 2010, the aim of the triple lock is to ensure that pensioners’ incomes would not be overtaken by the rising cost of living or increase in wages.
In September 2021, Work and Pensions Secretary Therese Coffey announced that for 2022/23, the State Pension will instead be determined by a ‘double lock’, ensuring it is increased by the higher of inflation or 2.5%.
Since the start of the Covid-19 pandemic, many people have seen a reduction in their earnings as a result of being placed on furlough. Now that furlough has come to an end and wages are returning to pre-pandemic levels, records reflect an artificially large rise in average earnings of approximately 8% from May to July 2021 (the relevant period for the uprating review). Using the triple lock formula would mean that State Pensions must increase by this amount.
Speaking in the House of Commons, Therese Coffey explained that removing the triple lock’s average wage increase component will stop pensioners ‘unfairly benefiting from a statistical anomaly’.
The full, flat-rate State Pension (for those who reached State Pension age after 5 April 2016) is currently £179.60 a week. The full, old basic state pension (for those who reached State Pension age before 6 April 2016) is currently £137.60 a week. Under the double lock guarantee, these figures are expected to rise to at least £184.10 and £141.05 respectively from April 2022. Had the 8% increase been applied, pensioners would have benefited from a record boost to their income which, according to the government’s press release, would mean a difference of around £4 or 5 billion in State Pensions expenditure in 2022/23.
The triple lock is an expensive policy and concerns have been expressed by the Treasury Committee regarding its sustainability. This has led to fears that its suspension could become permanent.
However, the government claims this is a one-year response to exceptional circumstances and that it will be reinstated thereafter for the remainder of this Parliament in line with their manifesto commitment.