Pensioners warned ‘don’t hold your breath’ despite Triple Lock victory

Pensions triple lock scrapped for millions of Brits

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Baroness Ros Altmann has led the calls for a U-turn on the controversial decision to remove the earnings link from the triple lock, which would reduce the increase retirees receive to their state pension. British pensioners set to get less than half of the increase they were expecting.

The House of Lords on Tuesday voted 220 to 178 in favour of retaining the state pension triple-lock next year.

The amendment backs using an adjusted earnings measure of around five percent to take account of the exceptional impact of the COVID-19 pandemic on the level of earnings.

The Government expects to save £5.4billion in 2022/23 following the decision to increase the state pension by 3.1 percent inflation figure rather than July’s 8.3 percent earnings growth figure.

However, despite the recent vote, it is believed that ministers are likely to reject the amendment and stick to their plan to temporarily suspend the triple lock and reinstate it in 2023.

Jon Greer, head of retirement policy at Quilter advised pensioners not to “hold their breath” as they hope for a resolution which would increase their state pension by a larger amount.

He said: “Tuesday saw defeat for the Government as the House of Lords rejected the proposed one-year triple lock suspension that would see pensioners lose out on an 8.3 percent pension increase.

“The Lords rebellion against the Government’s triple lock changes saw the Lords vote 220 for and 178 against an amendment to maintain the earnings link in the triple lock in 2022, although with a slightly different earnings figure than the 8 percent figure that has been headlined to date.

“The OBR currently forecasts inflation to peak at 4.4 percent next year, whereas the state pension will only rise by 3.1 percent in April 2022 if the triple lock suspension is in place.

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“In real terms, pensioners maybe left out of pocket if the suspension is passed, albeit that inflation during 2022 will be reflected in the uprating mechanism for 2023, but that may be held in scant regard by many pensioners in the immediate term.

“While a defeat is embarrassing for the Government, the Bill will return to the Commons where the amendment is expected to be voted down as they have privilege on financial matters.

“The debate surrounding the triple lock only further demonstrates the need to separate arguments around the level of the state pension and the method for uprating the state pension to ensure it is done in a way that is fair and sustainable.

“The Lords rejection likely gave pensioners a fleeting glimmer of hope, but they shouldn’t hold their breath.”

If the state pension rises in line with September’s 3.1 percent inflation figure in 2022, the basic state pension will rise by £4.25, from £137.60 per week to £141.85 per week. The flat-rate state pension will rise by £5.55, from £179.60 per week to £185.15 per week

If the earnings element of the triple-lock had been retained, the state pension could have increased by 8.3 percent next year. This would have increased the basic state pension to £149 per week and the flat-rate state pension to £194.50 per week

Decision to suspend the earnings element of the triple-lock for 2022/23 will therefore ‘cost’ retirees in receipt of the full flat-rate state pension £9.35 per week

Tom Selby, head of retirement policy at AJ Bell also commented on the issue and shared the opinion that a reversal of the Government’s decision is unlikely.

He said: “Scrapping the state pension triple-lock – a Conservative manifesto commitment – for one year was always going to be controversial, with pensioners set to miss out on a post-lockdown 8.3 percent boost in their retirement incomes.

“While a 3.1 percent inflation increase is better than nothing, with prices expected to rise by 4 percent over the next 12 months this is likely to feel like a cut in real terms for millions of retirees.

“However, the Government has already banked over £5 billion a year in annual savings from the move and so is highly unlikely to budge from its position.

“If the triple-lock were to be retained, the revised earnings measure would likely need to save the Exchequer almost exactly the same amount of money as scrapping the triple-lock – meaning the net impact on those in receipt of the state pension would in any event be relatively small.”

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