“Under a triple lock, average pensioner incomes could reach around 31 per cent of national average earnings by 2040, compared to around 30 per cent under a double lock and 2 per cent lower at around 29 per cent under the use of a smoothing mechanism in 2021, followed by a return to the triple lock.”
But the PPI warned a smoothing mechanism may require changes to legislation, or to the definition of earnings, as the government is currently required by legislation to increase the state pension by a minimum of earnings.
Aegon had raised a smoothing mechanism as an option last month (August 24), saying the triple lock should be considered over two years rather than one, with state pensioners granted whatever the formula produces next April and the increase in 2022 based on a two-year period.
This would then average out any rise in earnings growth.
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