What is the triple lock and how does it work?
The “triple lock” is the policy used to set how much the state pension rises each year. Following concerns it would have produced an unaffordable rise in the next year, the government has suspended it.
How the triple lock currently works
Each year, the state pension is supposed to increase inline with the highest of the following 3 areas:
- The average wage increase.
- Inflation, based on the Consumer Prices Index (CPI).
Why the triple lock will be suspended
Many people were placed on furlough which meant they were earning less than usual.
As those people return to work and full pay, a large rise in average earnings has been recorded (estimated at 8% from May to July 2021).
If the triple lock policy were to be invoked, it would mean that pensions would need to rise by a similar amount.
This unusual situation therefore creates a dilemma for the government who is already trying to find ways to reduce the debts built up during the pandemic and also fund the health and social care plan.
What will replace the triple lock
The triple lock will be suspended for 2022-2023. It will then be restored for the remainder of this parliament which ends in 2024.
The change excludes the average wage increase from the triple lock which means the state pension increase will either be based on inflation or 2.5%
The end of the triple lock?
Although the triple lock policy is set to return for the remainder of parliament in 2024, many fear that a suspension may be permanent.
Many pensioners do not have private pensions and believe that the pension is low when compared to other countries.
The triple lock guarantee was introduced to ensure pensioners did not see any rise in their state pension being overtaken by the rising cost of living, nor that the working population would be see a much bigger income rise than them each year.
The value of the current state pension
If you reached state pension age after 2016, the flat rate state pension is £179.60 per week.
The full, old basic state pension (for those who reached state pension age before April 2016) is £137.60 a week. A Pension Credit top-up may also be provided.
How Pensions have risen since 2011
The triple lock system has been in place since 2011. The following table shows the rise and what it was based upon.