The chairman of the Treasury committee has called for the suspension of the wages element of the pensions triple lock, saying a potential double-digit percentage rise in the state pension was “unrealistic”.
Mel Stride said suspending the wage element would be a “sensible approach”.
He said: "Over the last decade, the pensions triple lock has successfully protected the incomes of older people, who often have limited opportunities to increase their earnings. However, the ‘triple lock’ is unsustainable in its current form.
“A potential almost double-digit percentage rise is unrealistic and unfair, with knock-on effects for the public finances."
Under current triple lock rules the state pension is increased by the highest of earnings growth, price inflation or 2.5 per cent a year. There are mounting concerns wages growth could be artificially boosted this year as a direct effect of the government's furlough policy.
“Given that average wage levels have been skewed by the unprecedented events of the past 18 months, the chancellor should temporarily suspend the wages element of the lock" Stride said. "This is a sensible approach which will aid our recovery from the pandemic.”
Stride’s comments come after the committee sent a letter to chancellor Rishi Sunak asking whether the Treasury had considered temporarily suspending the wages element of the triple lock or temporarily calculating wage growth differently.
In his response, Sunak said while the government recognised the “legitimate concerns” about potentially inflated earnings numbers it was still unclear whether there would actually be a spike in earnings.
Sunak said: “We will continue to examine the data as it becomes clearer, and we will be guided by the principle that decisions on pensions must be fair to both pensioners and taxpayers.
“As with all aspects of government policy with major spending implications, I will take any decisions on future changes to the triple lock at the appropriate time in the context of the wider public finances, and in consultation with the prime minister and secretary of state for work and pensions.”
There has been speculation that the government could scrap the state pension triple lock uprating guarantee as pressure has piled on the chancellor after average earnings have jumped following the pandemic year.
A decision is expected to be announced this week.
According to data from the Office for National Statistics (ONS) last month (August 17), growth in average total pay (including bonuses) was 8.8 per cent and regular pay (excluding bonuses) was 7.4 per cent in the three months to June 2021.
But there is the question of whether earnings figures will increase further before the final reading is taken for the triple lock adjustment this month.
amy.austin@ft.com
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