Is the triple lock state pension uplift under threat?

Fears are mounting that the threefold increase in state pensions is in jeopardy after a minister declined to confirm whether the increase in inflation would be honored.

Chief Secretary to the Treasury, Chris Philp, declined to confirm to journalist Robert Peston on live TV whether state pensions and Universal Credit would be increased next year in line with inflation.

The state pension could go up to £10,000 a year if the government lives up to its promise to reintroduce the ‘triple lock’ on annual increases.

This guarantee means that state pensions will be increased by the highest of 2.5 percent, wages and inflation – although it was scrapped last year as the pandemic temporarily skewed the income figure.

Inflation is expected to be by far the biggest factor this year, leaving retirees queuing for a potential hike of 10 percent or more.

Chris Philp told Robert Peston live on ITV: ‘The case is pending. I’m obviously not going to make any policy announcements here.

‘We will think about it in the normal way in the coming weeks. I’m not going to make any policy announcements on live TV.’

The lack of assurance provided by the minister is likely to affect a large number of retirees struggling with the rising cost of living.

Despite the triple lock suspension last year, during the Conservative leadership campaign, Prime Minister Liz Truss pledged to reintroduce it this year.

However, the tightness of public finances may put it under pressure.

Helen Morrissey, senior pensions and pensions analyst at Hargreaves Lansdown, said: ‘These comments will be of great concern to retirees who were counting on their state pensions to be inflation inflationary next year under the triple lock.

“Many retirees struggle with their finances because the cost of energy and food has risen and their income cannot be kept up.

The triple lock was suspended last year as wage data was skewed by the pandemic leave scheme and retirees were instead given a 3.1 percent increase in line with CPI inflation at the time.

“However, it has risen dramatically since then, and many retirees were counting on a big increase from April next year to help them survive.”

Could the government dump the triple lock?

If the triple lock were to be dumped again, it could put even more pressure on the government, which has been critical of its economic policies to date.

Support for the guarantee scheme is overwhelming among retirees, but less so among younger generations.

According to a Canada Life survey that is representative of all adults in the UK, about 55 percent of adults generally stick to the triple lock under current conditions.

But that equates to 78 percent among over-55s, 44 percent among 35-54 year olds and 33 percent among 18-34 year olds.

Steve Webb believes that because of its popularity among the over-55s, the government may feel it must respect the triple lock or risk alienating core voters.

He said: “For a government already struggling in the polls, breaking the triple block on the state pension for a second year in a row would be a very risky strategy and I would be surprised if they didn’t pay a full inflation peg – especially so.” close to an election.’

However, Webb believes that the government may be less inclined to do the same for other benefits, such as Universal Credit.

He added: “I think they will feel like they can ‘get away with’ a sub-inflation hike; they will say that the cash increase is still relatively large (maybe 5-6 percent), and that if that’s what workers get, it’s only “reasonable” to pay the same to people on benefits.

Politically, they are likely to feel that they have far fewer core voters among people on benefits of working age compared to those on state pensions.

“If they want to save billions to fund tax cuts, DWP is the largest spending department, so it seems very likely it will be asked to save billions of pounds.”

What could an inflation-linked increase mean for retirees?

Inflation will be highest this year, so the AOW increase should be decided by the September CPI figure, due on October 19.

Inflation in August, which was published last week, was 9.9 percent, compared to 10.1 percent. The latest earnings growth, based on total pay including bonuses, was 5.5 percent.

But older folks waiting to find out what AOW raise they’ll get next April may find it still lagging prices, while inflation will continue to climb.

This year, skyrocketing inflation is taking a heavy toll on retirees struggling to pay their household bills.

Using the August inflation rate of 9.9 percent, retirees with a state pension of £185.15 a week or about £9,600 a year after 2016 would see an increase to £203.50 a week or £10,600 a year.

Those with the old base rate would see a jump from £141.85 a week or about £7,400 a year to £155.90 or £8,100 a year.