What is the Triple Lock? Is it guaranteed for the State Pension? Will it change?
It is not difficult to understand why many people have been concerned about the financial divide that the pandemic has widened.
The ‘haves’ with money seem to have accumulated additional wealth, spending less and saving more, with the ‘have-nots’ finding it harder than ever, perhaps being made redundant or furloughed, as examples.
It is also notable that the effects of the pandemic have been disproportionate across age groups, with many of the older generation being better off, and younger people suffering financially.
A reasonable example of this might be the recent situation with the planned increase in the State Pension, which is being considered at a level of 8% this year, based on the ‘triple lock’ calculation. Now we know this is a controversial issue in our present economic position, the triple lock is a decade old government guarantee to those in receipt of the State Pension that this benefit will rise each year in line with the highest of average earnings, the Consumer Prices Index (CPI) or 2.5%.
Given the pandemic-related costs that the government continues to face, the Chancellor, Rishi Sunak, may be under pressure to break the long-standing government promise to protect these pension benefits. Taking on board his current borrowing position, the significant cost of sticking to the triple lock might be a painful pill to swallow.
With inflation currently on the rise, and a forward view from the Bank of England that the position on the Consumer Prices Index (CPI) might double from around 2.1% to 4% this year before reducing closer to the current target of 2%, this problem may last longer than just a year. The increase is based on the CPI figure in September of the year before the next increase, which is applied in April. If the Bank of England is right, this could get expensive. If Chancellor maintains the position, some have suggested that this year’s cost of increase might be £3bn.
It will be interesting to see how this position is handled in the next few weeks, in deciding how next year’s increase will be applied and at what level.
It can certainly be worth checking your State Pension position, especially when its free, and if you have not achieved this recently, this can be checked online here: https://www.gov.uk/check-state-pension