State Pension  

State Pension: Triple lock earnings link suspended for one year

State Pension: Triple lock earnings link suspended for one year
 Thérèse Coffey, Secretary of State for Work and Pensions

The government has suspended the wages element of the pensions triple lock to avoid a disproportionate rise of the state pension following the pandemic.

In an announcement today (September 7), Thérèse Coffey, Secretary of State for Work and Pensions, said for 2022/23 the new and basic state pension will increase by 2.5 per cent or in line with inflation, which is expected to be the higher figure this year.

This means the earnings element has been suspended after concerns that pensions could rise by as much as 8 per cent next April as people returned to work after furlough.

Coffey said the decision was made to stop pensioners "unfairly benefiting from a statistical anomaly" and the policy would be reinstated in the following year.

Under triple lock rules the state pension is increased by the highest of earnings growth, price inflation or 2.5 per cent a year.

Tim Middleton, director of policy and external affairs at the Pensions Management Institute, said: “There are many within the pensions industry who have argued that the triple lock would be impossible to sustain indefinitely, so perhaps today’s announcement should be regarded as an acceptance of the inevitable.

"Time will tell if the planned restoration of the earnings-related element will indeed actually happen. However, all those who remain passionate about pensions will remain committed to further development of our system to ensure that the retired are guaranteed a secure and comfortable lifestyle.”

LCP partner and former pensions minister Steve Webb said: “With the earnings figures showing a spike because of the pandemic it is understandable that the government has taken the decision to suspend the triple lock for one year only.  

"But it is very welcome that they have recommitted themselves to the policy for future years.  

"The UK state pension remains relatively low by international standards and many women in particular depend on the state pension for a large part of their income in retirement.  

"To relax the rules on a one-off basis because of the distortions caused by the pandemic but to reinstate the policy for future years strikes the right balance."

The move marked the second manifesto promise broken today by the Conservative Party after the government effectively hiked National Insurance by 1.25 per cent to pay for its social care reforms.

There had been speculation the government could scrap the state pension uprating guarantee as pressure has mounted after average earnings jumped following the furlough programme during the pandemic year. 

According to data from the Office for National Statistics, growth in average total pay was 8.8 per cent and regular pay (excluding bonuses) was 7.4 per cent in the three months to June 2021.

Though readings for State Pension uprating purposes would have been taken this month (September).

amy.austin@ft.com

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