Sunak should 'step away' from pension triple lock says Gauke
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It looks increasingly like the Government’s triple lock policy, which was a manifesto commitment, is to be sacrificed to avoid deepening the UK’s financial hole.
First introduced in 2011 and Government policy since, the triple lock guarantees the state pension rises in line with the highest of wage growth, inflation or 2.5 percent.
However, due to artificial wage growth, brought on by workers tapering away from furlough support, the state pension will rise by extraordinary levels if the triple lock remains in place.
The bill for state pensions would rise by £2.5billion if it were to rise by 2.5 percent , £3billion if it rises with inflation and £8billion if in line with wages.
The current full state pension is worth £9,340 a year, which would rise to over £10,000 if it increases in line with wage growth.
If wage growth continues at current levels -8.8 percent- then the total value of the state pension will be taken to £10,162 a year. This would represent a rise of about £822.
But if the triple lock is suspended then this money would be lost by pensioners.
There has been speculation that the triple lock could be replaced with a double lock, with wage growth removed from the formula.
In this case, the state pension would rise either in line with inflation or by 2.5 percent.
A 2.5 percent rise would take it to £9,575, a £234 increase.
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This would mean a loss of £588 compared to what retirees would expect to receive if the triple lock remains in place.
Pensioners would therefore be losing out on a sizeable sum if the government chooses not to go along with a rise in line with wages.
Initial concerns with the double in the Treasury were that if inflation spiked, they would face a similar scenario to the one at current.
However, inflation figures released by the Bank of England today have shown it has fallen to the Bank’s target rate of two percent in the year leading up to July.
This figure is down from 2.5 percent the month before.
It has been touted that the Government may decide to simply suspend the triple lock and implement a 2.5 percent increase on a one-year basis.
However, some have predicted inflation to soar in the coming months, which could lead to the state pension’s value decreasing in real terms if it this is the case.
Rishi Sunak has previously said: “We want to make sure the decisions we make and the system we have are fair, both for pensioners and taxpayers”.
This prompted speculation that the triple lock will be suspended which has only intensified ever since.
But amid talk of fairness, it has been pointed out that the UK already has an small state pension by international standards.
Replacing pre-retirement income by an average of only 22 percent, the UK’s is one of the least generous state pensions in the developed world.
Furthermore, the state pension makes up the majority of total income for 60 percent of retired households, so any changes to the triple lock would have a big effect on millions of pensioners.
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