The triple lock, introduced in 2010, pledges to increase the state pension by either inflation, earnings or 2.5 percent, whichever is highest.
It was suspended this year, denying state pensioners an increase of more than 8 percent as earnings rebounded strongly, because the Department for Work and Pensions said the figures had been “skewed and distorted” by the pandemic and furlough.
Instead, the state pension rose by just 3.1 percent, leaving millions feeling cheated as inflation rages unchecked.
Before resigning as Chancellor, Rishi Sunak pledged to restore the triple lock next year, while Tory Party leadership rival Liz Truss has said she will maintain it for three years if elected Prime Minister.
That could see pensioners get a bumper pay rise from next April, assuming inflation does soon hit double digits.
September’s inflation figure is key, because that is the month used to determine the triple lock rise.
A 13 percent figure would see the full new state pension increase from £185.15 to £209.22 a week, said Aegon pensions director Steven Cameron.
That would be the biggest ever increase, and lift the new state pension to £10,879.41 year.
Yet it would also cause controversy, as state pensioners get some protection against inflation, while many workers do not.
Incredibly, two thirds of UK workers have yet to receive a pay rise this year, despite the cost-of-living crisis, according to research published by workforce and advisory specialist Resource Solutions.
A bumper triple lock increase would trigger accusations of unfairness. Cameron said: “It would also make the state pension harder to fund, given that it’s current workers who fund it via their National Insurance contributions.”
He said that in these unprecedented times, it may no longer make sense to base the triple lock on one year’s figures: “It can lead to inequalities between those of working age whose earnings may be increasing at a very different rate.”
Cameron suggested basing state pension increases on three years of figures instead: “That would still protect pensioners, but would average out the peaks and troughs, and arguably create a fairer and more predictable outcome for all concerned.”
The triple lock has done sterling work in helping reduce pensioner poverty Yet despite assurances from Truss and Sunak, pensioners cannot be confident that it will survive in the longer run.
Younger people who are still working should be particularly wary about relying on the state pension, as the retirement age rises and our ageing population places yet more pressure on the Treasury’s coffers.
The retirement age is set to rise to 67 from 2026, and will keep climbing thereafter to 68 and beyond, said Canada Life technical director Andrew Tully: “The only way to guarantee a comfortable retirement is to save for it under your own steam.”
That is tougher than ever as incomes are squeezed, while for today’s pensioners, it is simply too late. They have to survive on whatever the Government gives them, and desperately need the triple lock to stay.