Will the pension triple lock be broken as inflation hits 10.1%?

Retirees could face a ‘double whammy’ next April if the triple lock is broken again and lose out on £442 a year.

Under the triple lock, retirees should see their state pension rise by as much as 10.1 percent next year if the government keeps its promise.

But with new Chancellor Jeremy Hunt slashing budgets and the prime minister’s refusal to reaffirm the Tory pledge on raising pensions will be fulfilled, there are fears the triple lockdown could be lifted again.

Steve Webb, This is Money’s retirement columnist and a partner at LCP said: “When the triple lock pledge was broken in 2022, the government insisted this was a one-off measure due to the special circumstances of the pandemic.

“It would be a high-risk political gamble to break this manifesto commitment for a second year.”

He added: “Many retirees have faced significant pressure on their living standards this year following a very low pension increase in April 2022 and expected the April 2023 increase to help mitigate the large increases in the cost of energy and energy. to capture energy. food.

Breaking the triple lock could cost a single retiree £442 a year. A lower pension increase, combined with a cut in the aid on the energy bill, could be a ‘double blow’ for millions of retirees.’

The triple lock guarantee means that the state pension must be increased by September’s highest inflation rate, wage growth or 2.5 percent.

But it was dumped last year as the Covid pandemic leave scheme and then job recovery temporarily skewed earnings.

Inflation rose to 10.1 per cent during the key month of September, the ONS announced today, meaning that if the figure is used, the full new state pension will rise by £18.70 a week to £203.85, while the basic pension from £141.85 a week to £156.20.

However, there is growing fear that the government will renege on its triple lock promise, despite Prime Minister Liz Truss emphasizing her commitment to the triple lock on previous occasions and in her leadership campaign.

Why is the triple lock threatened and when will we know?

When he took the ax this week for his predecessor Kwasi Kwarteng’s fateful mini-budget cuts, new Chancellor Jeremy Hunt refused to be pulled over as to whether the triple lock would be used this year.

Ominously, he said he would have to make “decisions of dazzling difficulty” amid looming budget cuts.

This was followed yesterday by reports that the official spokesperson for Liz Truss has indicated that renegotiation is required.

While the inflation rate that determines the triple lock has now arrived, the rise will only start in April next year.

Experts believe the chancellor could leave retirees waiting for confirmation of what will happen until the planned October 31 fiscal update, which explains how the government plans to budget the books.

Mr Webb thinks the triple lock could be saved, saying ‘personally I’m quite skeptical they would scrap it’ but warned that the removal of the energy price guarantee limiting the average household bill to £2,500 from April, coupled with the end of the energy discount, will already cause problems for many retired households.

Caroline Abrahams, charity director at Age UK, said: If the Prime Minister decides to break her triple lock pledge it would be devastating for the millions of elderly people who depend on the state pension, which is only worth around £9,000 a year on average anyway , as their main source of income.

“Knowing that their state pension would keep pace with rising prices due to the triple lock has given many older people precious hope in a time of great fear; for the government to take that away from them now would be a hammer blow, and also a blatant breach of trust.’

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

However, the tight public finances are now putting pressure on her and her government to make another U-turn.

How much does the triple lock cost?

Raising the state pension through inflation rather than average earnings would cost the chancellor an estimated £4 to £5 billion

Tom Selby, head of pension policy at AJ Bell, said: Throwing out the triple-lock, a manifesto in 2019, for the second year in a row and hitting millions of retirees straight into the pocket would certainly be another hammer blow to conservatives in the United States. polls.

On the other side of the debate, recently installed Chancellor Jeremy Hunt has been tasked with restoring confidence in the UK budget plan and taking all spending commitments with a fine-toothed comb. In that regard, granting an AOW increase of 10.1 percent can be seen as a cost item.

What can breaking the lock mean for retirees?

The statutory minimum increase in the state pension (without separate legislation) would be to increase it only in accordance with the average wage.

Annual wages rose by 5.5 percent. If used, the full state pension would rise to £195.35 per week and the basic pension would rise to £149.65 per week.

This means that if pensions increased by earning more than CPI inflation, the weekly new state pension would be about £8.50 per week lower and the annual loss would be £442

There could be a double whammy for retirees as the Chancellor has also announced that universal assistance with utility bills will end in April 2023, suggesting that retirees not on benefits could see their real incomes under pressure just as their spending rises. .

This comes on top of a very low state pension increase of just 3.1 percent in April, when inflation was already at 9 percent, reflecting the pressure that retirees have already faced this year.