Each year, the rise in the cost of living seen in the Consumer Prices Index (CPI) increases the state pension that is a measure of inflation, increasing average wages, or 2.5%, whichever is highest is known as Triple Lock. It is a conservative manifesto pledge for the five years of this Parliament.
The impact of Covid on the triple lock?
Since a lot of people have returned to full pay coming off from Furlough, it has recorded a big rise in the average earnings. Also, job losses have affected low-paid workers. This leads to a unique situation that can also be described as Anomaly.
As per the Bank of England prediction, the state pension can raise equivalently as the average earnings could go up by 8%. If compared with the last decade, the rise seen is considerably higher than the rises seen under the triple lock.
Could the triple lock change?
The chancellor has hinted that to ensure the “fairness for pensioners and taxpayers” the triple lock should be broken. At present:
1) For those who reached state pension age after April 2016, the full and new flat-rate state pension is £179.60 a week
2) The full, old basic state pension (for those who reached state pension age before April 2016) is £137.60 a week and may also get a Pension Credit top-up.
What happens next?
The official figures on rising wages will be published later in the summer which generally governs that leg of the triple lock. Seems it will be the autumn before the government decides on the calculation for next April’s state pension rise.