Despite the fact that the promise will cost the Treasury an extra £10bn next year, Rishi Sunak has pledged to stick to the pension triple lock. This move puts them £2.5bn over their estimates from the spring budget. With questions as to the affordability of this scheme, learn more about the triple lock and what this could mean for your pension.
This does not constitute advice and advice should be sought in all instances before acting on it.
What is the pension triple lock?
The ‘triple lock’ is a safeguard for the UK state pension, to ensure that inflation doesn’t wreak havoc on its value. In the wake of the coronavirus outbreak, there have been calls to scrap or modify the triple lock as many fear it will become too expensive to maintain.
This is because under the triple lock, every year pensions rise by whichever is highest: pay growth, inflation, or 2.5%. As you may well know, inflation has been soaring recently, which means the cost of this scheme has surged since 2022, causing the government’s own spending watchdog to question the long-term viability.
Safe for now
When questioned, the prime minister said he was comfortable with pensioners receiving the full annual uplift even though the state pension cost the taxpayer £124bn this year. Even more unsettling, according to the latest economic data, it’s on course to rise by a further 8% in April.
Experts say that this is how the scheme is supposed to work. In the midst of a cost of living crisis, pensioners have benefitted from two years of protection when prices rose faster than income and now that earnings are rising more quickly than prices.
They go on to say that of course, at some point in the future the triple lock guarantee needs to be addressed. But at this point, in the run-up to an election, a move like that would be highly unlikely.
So, it appears the triple lock is safe for now. For more information about pensions and to discuss your options, get in contact with us today.