State pension 'triple lock' to be suspended for a year
The state pension will rise by a smaller amount next April as the Government has announced plans to temporarily suspend its so-called 'triple lock', which guarantees how much the benefit will rise by each year. But the change needs to be approved by Parliament first.
The triple lock guarantee is a commitment from the Government that the state pension will increase each year in line with inflation, average earnings or 2.5% – whichever is highest.
But the work and pensions secretary, Thérèse Coffey, told MPs today that next year's rise will instead only be based on the higher of inflation or 2.5%, because of an "irregular statistical spike" in average earnings growth caused by workers coming off furlough and pandemic-related restrictions easing.
That spike would mean increasing the state pension by 8% or more, which "would not be fair" given the impact on working people of other measures, such as a freeze in income tax personal thresholds, Ms Coffey added.
Parliament will first need to approve the change though, with the exact rise likely to be confirmed in October. See our State Pension guide for more info on what you could be entitled to.
The news comes just hours after Prime Minister Boris Johnson announced an increase in National Insurance contributions for workers, also from April 2022, to help fund health and social care costs.
State pensions should still rise by at least 2.5%
If the earnings element of the triple lock is set aside, the state pension is set to increase by the higher of 2.5% or September's consumer price index (CPI) inflation figure, which will be published next month.
A 2.5% increase would see the maximum payments for those who reached state pension age on or after 6 April 2016 rise by £4.49, from £179.60/week to £184.09/week – an annual increase of £233.48.
What does the Government say?
In a statement published on Gov.uk, the Department for Work and Pensions said: "Younger people have been hit hardest by the financial impacts of the pandemic, and the artificial inflation of pensioner incomes at this time would be out of kilter with the pressures being experienced by the rest of the population.
"This legislation makes sure pensioners' spending power is preserved and they're protected from higher costs of living, while ensuring they are not unfairly benefitting from a statistical anomaly."
MSE weekly email
FREE weekly MoneySaving email
For all the latest deals, guides and loopholes simply sign up today – it's spam-free!
Join the MSE Forum discussion