State Pension  

Govt rejects Lords’ attempt to retain triple lock

Govt rejects Lords’ attempt to retain triple lock

The House of Commons has rejected proposed amendments from the House of Lords to retain the earnings element of the state pension triple lock next year.

In a debate yesterday (November 16) the government said it would stick with its decision to temporarily suspend the wages element of the pensions triple lock for 2022-23 to avoid a disproportionate rise of the state pension following the pandemic.

This is despite the Lords calling for it to maintain the link between pension uprating and earnings.

In the debate pensions minister Guy Opperman said it would be "reckless" for the government to maintain the link this year, because the data relating to earnings is skewed by the pandemic and the furlough scheme.

He said: "[Office for National Statistics] experts investigated whether it was possible to produce a single robust figure for underlying earnings growth that stripped out impacts from the pandemic, and concluded that it was not possible.

"We believe it would be reckless in procedure and in law for this or any other government to set a precedent for uprating benefits or pensions using a methodology that is not robust and for which there is no consensus.

"That is why the government have decided to suspend the earnings link in this year of exceptional and anomalous earnings growth."

With the earnings component stripped out, state pensions will increase by September’s CPI rate of 3.1 per cent next April.

But Steven Cameron, pensions director at Aegon, said the latest inflation figures to be published tomorrow (November 17) are expected to surge to 4 per cent or above, with further increases likely over the winter.

Indeed the Bank of England has predicted inflation could reach 5 per cent next year, before falling back.

Cameron said: “Most would agree maintaining the state pension triple lock in its unadjusted form would have failed the test of intergenerational fairness, granting pensioners a ‘pandemic windfall’ increase of over 8 per cent arising from distortions in earnings during furlough.

“The multi-billion pound cost of this would have been met from the national insurance of today’s workers. But taking away the earnings component entirely and using an inflation figure which is already past it’s sell by date is a double whammy to those for whom the state pension is their main or only income in retirement.”

In the debate, Stephen Timms, chairman of the work and pensions committee, warned that people must be able to trust in the state pension under the policies of the government. 

“They have been able to do so up to now, and now they will not,'' Timms said. “That raises a pretty fundamental question about the future of the government’s pensions policy.”

He added: “There is a real danger in allowing, almost by sleight of hand albeit for reasons that we all understand and sympathise with, the state pension to fall permanently behind the increase in earnings and weakening the pension framework that, as far as we all know, is still the basis of the Minister’s policy.”