The state pension triple lock has been temporarily shelved for a year, the UK Government has announced.
Here is a look at why the policy was introduced and what the announcement means:
– What is the triple lock?
It is a Government guarantee that pensions grow in line with whichever is highest out of earnings, inflation or 2.5%.
It was introduced to help give pensioners a decent minimum level of income which would keep pace with growth in workers’ earnings.
– What has happened?
The wages measure within the triple lock has been temporarily removed.
Next year’s increase will instead be based on either 2.5% or inflation.
– Why has this been announced?
Many people have returned to work after previously being furloughed during the coronavirus crisis. Many low-paid jobs have also disappeared. This has created artificial growth in wages.
Pensions could have increased by as much as 8% at a time when many working people have faced pay cuts or freezes.
Since the triple lock was brought in, the state pension has increased by 35%, while average earnings have increased by 27%.
– Why is the announcement politically significant?
The triple lock suspension and an increase in national insurance (which will fund health and social care) mean two manifesto commitments have been breached in the same day.
However, it could also be argued that people are living in extraordinary times, against the backdrop of the coronavirus crisis.
– Is suspending the triple lock a price worth paying?
Former Liberal Democrat pensions minister Sir Steve Webb who is now a partner at LCP (Lane Clark & Peacock), said: “The UK state pension remains relatively low by international standards and many women in particular depend on the state pension for a large part of their income in retirement.”
But he added: “To relax the rules on a one-off basis because of the distortions caused by the pandemic but to reinstate the policy for future years strikes the right balance.”
Caroline Abrahams charity director at Age UK said: “If suspending the triple lock for a single year helps get a Government deal on social care over the line then I believe it’s a price worth paying, but only if it really is just a one-off measure and not a sneaky way for ministers to ditch the triple lock altogether.”
TUC general secretary Frances O’Grady said: “This is a dangerous precedent. If the Government is allowed to pick and choose when to apply the triple lock, the result will be lower state pensions for future generations and more pensioners experiencing hardship.
“This decision will hit old and young alike.”