Pensions  

Is this one lock that Sunak cannot unpick?

James Jones-Tinsley

James Jones-Tinsley

On October 19, the Office for National Statistics confirmed that UK inflation had returned to a 40-year high of 10.1 per cent over the year to September 2022.

Aside from its magnitude, the significance of this figure is that it is typically used to increase benefits from the following April, including the state pension.

Over the preceding few months, several politicians had committed to the reintroduction of the pensions triple lock. This mechanism ensures that state pensions increase by the higher of inflation, wage growth, or 2.5 per cent each year.

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In 2021, while the new prime minister Rishi Sunak was chancellor, the government replaced the triple lock with a ‘double lock’, due to an unusually high wage growth figure caused by the ending of the Covid-19 furlough provisions.

The return of the triple lock – a Conservative manifesto promise in 2019 – was therefore widely anticipated, especially among pensioners, who had seen their state pension increase by just 3.1 per cent in April 2022, while inflation had reached 9 per cent. 

The full, new flat-rate state pension (for those who reached state pension age on or after April 6 2016) is currently £185.15 a week.

The full, old basic state pension (for those who reached state pension age before April 6 2016) is currently £141.85 a week. Recipients may also qualify for a Pension Credit top-up.

Clearly, if the state pension was to be increased by 10.1 per cent next April, that would see the new state pension exceed £200 per week for the first time.

Against a backdrop of rising food prices, fuel, and heating and lighting costs – which pensioners typically spend a significant percentage of their income on – an increase of this magnitude would not only be welcome but would help to improve the purchasing power of the state pension in real terms.

It is also important to note that not every pensioner receives a full state pension and that for a proportion of pensioners the state pension is the only source of income that they receive in retirement.

The dependence by this latter cohort on this benefit, many of whom are elderly females, cannot be understated.

Cannot confirm nor deny

Despite this, however, the various personnel changes among the Conservative government during the last few weeks, against the backdrop of a worsening economy, has been accompanied with recurring doubts over whether the pensions triple lock will return.

The newly installed chancellor, Jeremy Hunt, started his tenure on October 17 with the scrapping of several provisions outlined in his predecessor’s doomed "mini" Budget in September to try to calm nervous markets and restore a semblance of financial stability.

By the following evening, the then prime minister, Liz Truss, was refusing to confirm that the lock would be reinstated, after Hunt said that he was “not making any commitments” on the pensions policy earlier that day.