Change to the State Pension Triple Lock
Pensioners ‘deeply disappointed’, particularly women and self-employed
The earnings benchmark of the State Pension triple lock will be temporarily set aside for next year. The Department for Work and Pensions (DWP) confirmed on 7 September that the State Pension triple lock rule will not be applied for the 2022/23 financial year over concerns of the potential costs involved.
It comes after the Office for Budget Responsibility (OBR) said in July that pensioners could see their payments rise by as much as 8% due to the guarantee. The triple lock guarantees that pensions grow in line with whichever is highest out of earnings, inflation or 2.5%.
Average earnings component disregarded
Work and Pensions Secretary, Therese Coffey, said the average earnings component would be disregarded in the 2022/23 financial year. ‘I will introduce a Social Security Uprating and Benefits Bill for 2022/23 only,’ she told the Commons.
‘It will ensure the basic and new State Pensions increase by 2.5% or in line with inflation, which is expected to be the higher figure this year, and as happened last year, it will again set aside the earnings element for 2022/23 before being restored for the remainder of this Parliament.’
Skewed and distorted statistical anomaly
Ms Coffey said the figures had been ‘skewed and distorted’ by the average earnings rise, which she described as a ‘statistical anomaly’.
She said the change meant that pensions would still rise, but less quickly. The triple lock would return the following year, she added.
Bedrock of many pensioners’ retirement income
Many pensioners will be deeply disappointed that the triple lock has been scrapped for next year, as the State Pension is still the bedrock of many pensioners’ retirement income. Women and those who are self-employed are among those who will be particularly affected by the temporary scrapping of the triple lock, as they are more likely to rely on the State Pension in retirement.
However, it is encouraging that the government hasn’t abandoned its longer-term commitment. The 2.5% minimum rate has been used on a number of occasions, and is having the effect of slowly increasing what people receive in real terms. The long-term trajectory of the State Pension will also be more important to younger people, more than a one-off hike in line with earnings this year.
For more information or to discuss any of the issues raised in this article, please contact your adviser, or call us directly on 0161 819 1131. Further information can also be found at gov.uk.