By suspending the wages element of the pensions triple lock, the government has remained fair to both pensioners and taxpayers, although the former is likely to be disappointed, industry experts have said.
The government’s decision to scrap the earnings link for next year's state pension uprating, while expected, will disappoint pensioners who were potentially in line to receive an 8 per cent boost to their state pension.
However, the move was needed in order to maintain fairness between the generations, the industry has 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.
The government said the decision was made to stop pensioners "unfairly benefiting from a statistical anomaly" and the policy would be reinstated in the following year.
Helen Morrissey, senior pension and retirement analyst at Hargreaves Lansdown, said: “Such a move will no doubt disappoint pensioners who could have been in line for an inflation busting increase to their state pension of more than 8 per cent under the triple lock.
“However, given many of the working population saw their income fall during the pandemic such a large increase would be unlikely to be popular - any solution needs to be fair to pensioners and taxpayers alike.”
Ian Browne, pensions expert at Quilter, said defending a significant increase in the state pension would have been “a tricky message for the government to get across”, especially as it hiked National Insurance rates by 1.25 per cent to pay for social care reform.
The government's decision on the triple lock was “undoubtedly linked” to its social care announcement, said Tom Selby, senior analyst at AJ Bell, saying the prime minister would have been keen to ensure that older and younger voters shared the burden of coronavirus-related costs.
He added: “Whether or not voters will forgive the government is another question entirely, however.
“Research carried out by AJ Bell yesterday suggested just 8 per cent of people support any change to the triple-lock – although it is possible this particular piece of bad news will be largely buried by the National Insurance hike.”
Renny Biggins, head of retirement at TISA, said the pandemic has highlighted several areas where policy needs review, with the triple lock falling into this category.
Biggins said: “It should not be so visibly skewed, either positively or negatively, by outsized fluctuations in one of its parameters. A one-year suspension is a reasonable, short-term solution to a disproportionate outcome.
“However, longer term, there is a clear need for a formula that guards against such short-term distortions while maintaining a long-term rise in the state pension in real terms, adjusting for inflation.”
But others weren’t as happy about the temporary change, with TUC General Secretary Frances O’Grady saying it will halt pensions progress.