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The End of the Triple Lock Pension, Perhaps?

Pension triple lock guarantees generous state pension increases – keeping the rate consistent with whichever is the highest — inflation or average earnings growth, or 2.5%. In effect for nearly a decade, these increases might be on the way out after the government realises the full impact of the fallout from coronavirus.

This does not constitute advice and advice should be sought in all instances before acting on it.

How much will state pension increase in 2021?

Based on how the government normally increases allowances, for 2021, it should rise by 2.5%. This is because CPI inflation will most likely be lower — it was only 0.5% in May — and the number of people furloughed throughout the pandemic will possibly mean a fall in earnings.

This poses a problem for 2022 as the country will hopefully be well on its way to recovery but the difference between the two years (furlough-depressed average earnings in 2020 vs ‘normal’ earnings in 2021) could throw a spanner in the works. Experts are predicting a fall this year but also a significant growth for next year and the disparity will likely prevent the chancellor from wanting to fund the state pension rise.

Could this be the end of the triple lock?

At the start of the pandemic, the idea of abolishing triple lock pensions was being floated on the grounds of it being an unnecessary cost, but politicians didn’t want to rock the boat if they didn’t have to.

But with COVID-19 troubles added into the mix, it seems unavoidable. Across the board, we’ve all been making concessions, so it stands to reason that triple lock pensions would be on the chopping block. Some have even suggested that state pensions could be frozen over the next two years until recovery has well and truly been achieved.

How should you react?

There’s no doubt about the importance of state pensions to many people’s retirement plans, but it’s one thing that’s not entirely in their hands. We’re at the mercy of the state when it comes to state pensions so the only thing we can do when the government makes changes is to adapt.

It’s crucial you have other elements as part of your retirement saving strategy, ones that you’re in complete control over, like private pensions and investments.

Contact us for help with pension planning

For help reviewing your retirement plans and ensuring you have a plan should triple lock pensions be done away with, get in touch with us today.

Let us help you plan for your retirement
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