State pension triple lock fears as policy may be ‘unaffordable’

Jonathan Ashworth calls for return of pension triple lock

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Fears surrounding the future of the state pension triple lock are continuing to spiral, leaving pensioners unsettled. The triple lock ensures the sum increases each year by the highest of 2.5 percent, inflation or average earnings.

This year, pensioners are banking on a bumper boost as inflation continues to stand at significantly high levels.

It is thought the substantial increase will go some distance towards remedying the double lock implemented this year due to warped earnings data as a result of COVID-19.

However, as the new Prime Minister Liz Truss outlines a bold, and somewhat controversial, economic policy, there are lingering worries about the longevity of the triple lock.

Ray Black, managing director of Money Minder, commented on the matter.

He said: “There have been some warnings that continued high increases in state pension costs could quickly become ‘unaffordable’ for the Government if Truss upholds the triple lock policy for too long. 

“It will be interesting to see just how long the ‘triple lock’ policy stays in place.”

Ms Truss has not yet explicitly confirmed whether the triple lock will be making a return next year.

However, when running for the Tory leadership, the former foreign secretary did express her desire to see the policy reinstated.

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The temporary suspension to the triple lock this year is thought to have saved the Treasury an estimated £5billion.

Tom Selby, head of retirement policy at AJ Bell, noted Ms Truss has previously pledged “not to go down this path again”.

He added: “Assuming she sticks to her guns and the triple lock remains in place, retirees could receive a huge boost to their incomes next year. 

“September’s inflation figure will be the one to look out for, with the Bank of England predicting a peak at 13 percent at some point later this year.”

But Mr Selby also highlighted the costs of the triple lock, which may be difficult for the Government to reckon with.

He added: “If it were to hit 13 percent for September, the basic state pension would rise by £18.45 to £160.30 a week (£8,335.60 a year) in April 2023, while the new state pension would increase by £24.10 to £209.25 a week (£10,881 a year).

“This could cost the Treasury well in excess of £10billion — a huge price to pay for the keys to Number 10. 

“What’s more, this isn’t a one-off cost, it would fall on the exchequer every year.”

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Pressure is therefore mounting on the Government to make a decision and convey this sooner rather than later.

Mr Black highlighted a confirmation of the triple lock could provide some welcome encouragement to worried pensioners.

He continued: “Many pensioners are, like much of the population, quite worried about the rising energy and food costs in the coming months and how the interest rates hike will affect them. 

“Even with the Government’s announcements of financial support, it could make it a very tough winter for many, especially for those who are already struggling to make ends meet. 

“There is expected to be a very helpful increase in the state pension next April if Ms Truss follows through with her promise to reinstate the pensions triple lock.”

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