What is the triple lock and what difference does it make to pensioners?

Inflation is back in double digits as uncertainty surrounds the future of the pensions triple lock.

Vicky Shaw, PA Personal Finance Correspondent

Wed, 19 October 2022 at 5:45 pm·2-min read

Here is a look at how the triple lock normally works and what difference it could make to pensioners.

– What does the triple lock do?

The triple lock guarantees that the state pension rises every year in line with inflation, earnings or 2.5% – whichever is highest. September’s inflation figure, at 10.1%, would normally be part of the calculation.

The policy helps to ensure pensioners’ living standards keep up with those of the wider population. More than 12 million people receive the state pension.

(PA Graphics)

– What has happened to the triple lock?

The triple lock was previously paused for a year, as the coronavirus pandemic had distorted the wages element of the triple lock. Pensions rose by 3.1% this year.

– So what is happening now?

Prime Minister Liz Truss had previously stated she was committed to the triple lock.

However, there have been indications that ministers could ditch the commitment, with new Chancellor Jeremy Hunt searching for ways to plug a multi-billion pound black hole in the wake of the turmoil following the mini-budget.

Liz Truss previously stated she was committed to the triple lock (Daniel Leal/PA)

– Why would axing the triple lock be controversial?

Politically, it could inflict further damage, following a string of recent policy u-turns. It was a Conservative manifesto pledge and its previous suspension had been viewed as a one-off due to the distorting impacts of the pandemic.

Ditching the promise would affect some of the most vulnerable people in society, many of whom live on fixed incomes, as high inflation wreaks havoc with household budgets.

However, some may make arguments around “intergenerational fairness”, with many working age people receiving pay rises well below the current rate of inflation.

– What impact would there be in cash terms if pensions rose in line with earnings next April instead of inflation?

If pensions rose by 5.5%, in line with earnings, the weekly new state pension would be £195.35. But if it rose in line with Consumer Prices Index (CPI) inflation, at 10.1% it would be £8.50 per week higher, at £203.85.

This would add up to a difference of £442 over the course of a year in pensioners’ pockets.

What it the triple lock and what difference does it make to pensioners? (yahoo.com)

Triple lock pledge will cost Truss £11bn as inflation hits 10.1pc - live updates

Eir Nolsoe

Wed, 19 October 2022 at 7:07 pm

Liz Truss will be forced to find more than £11bn next year to commit to the pensions triple lock pledge and as much as £13bn to keep working-age benefits in line with the cost of living, as inflation soars to 10.1pc.

The embattled Prime Minister faces a fresh financial blow from payments to the elderly if she restores the key Conservative pledge to increase the state pension by the highest of inflation, average earnings or 2.5pc.

But Ms Truss is now considering ditching the promise which was contained in the 2019 Conservative election manifesto because of the squeeze on public finances in the wake of the mini-budget fiasco.

September’s inflation figure is used to set the following April’s pension rise.

In a case of bad timing for the Government’s finances, consumer prices were up 10.1pc last month, the joint-highest level since the early 1980s.

In April 2022 the Government increased the pension by 3.1pc, in line with inflation, rather than the much higher pace of earnings which had been distorted by the pandemic lockdowns and the furlough scheme.

Triple lock pledge will cost Truss £11bn as inflation hits 10.1pc - live updates (yahoo.com)