Chancellor Jeremy Hunt has announced a full commitment to the Triple Lock with an 8.5% in state pensions in the Autumn Statement today.
This increase from April next year will see the ‘new’ state pension going from £203.85 per week to £221.20, equating to £11,502.40 per year.
Had the government opted to use the average earnings growth figure that strips out bonuses, which came in at 7.8% in July, this would have implied an increase in the ‘new’ state pension to £219.75 per week from £203.85.
Future state pension policy
Tom Selby, head of retirement policy at AJ Bell, pointed out that while many political parties may go into the general election committing to the Triple Lock policy in their manifestos this will cause the debate about the state pension to be put on the back burner.
He said: “Any politician that advocates maintaining the Triple Lock is effectively admitting the state pension is too low.
“Rather than putting in place a coherent plan to increase the value of the state pension in real terms, the Triple Lock randomly ratchets up the state pension depending on earnings growth and inflation at a specific point in time each year.”
Not the time to tweak Triple Lock
Paul Waters, partner at Hymans Robertson, expressed that now was not the time for the chancellor to be tweaking the Triple Lock as the increased income it provides will be desperately needed by pensioners.
He commented: “Changes to the Triple Lock, or the state pension, shouldn’t be made in a piecemeal way. In a period of relatively high inflation and interest rates, financial metrics and benefits shouldn’t be looked at in isolation.
“Short-term decisions like suspending the Triple Lock aren’t a simple fix to the challenge of managing high levels of public spending and the ageing population.
“It needs a long-term solution, so, once the state pension is at a more meaningful level for the pensioners relying on it, the mechanism of ensuring fair but affordable increases must be addressed.
“Deep-rooted reforms that consider the interaction of pension savings, tax, and other benefits including care are needed.”