Prime minister Rishi Sunak has confirmed that the government will keep the pension triple lock in place, which should “provide retirees with a huge sigh of relief”.
The pension triple lock is a government promise to raise publicly funded pensions by the level of earnings, inflation or 2.5% – whichever is highest.
Sunak said: “Of course the government is committed to its policy on the triple lock.”
Yesterday (16 August), the Consumer Prices Index (CPI) showed inflation was down to 6.8% in July from 7.9% in June, the Office for National Statistics (ONS) said.
AJ Bell head of retirement policy Tom Selby also said: “We will need to wait for July’s earnings figures to come through to know exactly what this means, but if the 8.2% [earnings] growth we saw in June is repeated, that would increase the full flat-rate state pension to over £220 per week, or almost £11,500 per year.”
He suggested the government’s commitment to the triple lock “no doubt has at least one eye on the general election”, which is scheduled for January 2025.
Selby stated if earnings growth remains above expectations, the Treasury will need to find “a few extra billion quid” to fund the triple-lock. It has been estimated that next year funding the triple-lock could cost an extra £10bn.
A pivotal issue surrounding the triple-lock as Selby sees it “is that it is a policy without a clear goal as things stand, randomly ratcheting up the value of the state pension in real terms whenever inflation and earnings growth are below 2.5%. It also leaves the government exposed to spikes in inflation or earnings, a flaw which has been brutally exposed in recent years.”
He believes that what all ages need from the government is “stability” and that will not come unless there is “cross party agreement” on how much income the state pension should provide in retirement.
Chancellor of the exchequer Jeremy Hunt originally responded to news of the drop in inflation and said: “The decisive action we’ve taken to tackle inflation is working, and the rate now stands at its lowest level since February last year.
“But while price rises are slowing, we’re not at the finish line. We must stick to our plan to halve inflation this year and get it back to the 2 per cent target as soon as possible.”
