The chancellors’ decision could be putting those who turn 66 this year out of pocket by more than £11,000 by the time they turn 85
Chancellor Rishi Sunak is considering making changes to the governments’ current commitment to increase the value of the state pension every year.
The chancellors’ decision could be putting those who turn 66 this year out of pocket by more than £11,000 by the time they turn 85.
The current triple lock government pledge means the basic state pension and new state pension must rise every year by at least 2.5 per cent.
But the Chancellor is not overly keen on giving pensioners a significant boost according to The Express.
Earnings data published by the Office for National Statistics (ONS) today showed growth was only at 8.8% due to mass redundancies, wage cuts and furlough which caused a steep fall in average earnings due to the coronavirus pandemic.
Mr Sunak wants to avoid using skewed economic data to keep the guarantee on its feet, and instead use “underlying” earnings data, which removes the abnormal effects of the pandemic.
Before 2011, the State Pension rose in line with the retail prices index measure of inflation, which was consistently lower than annual rises in earnings or 2.5 per cent.
The last few years – in which earnings growth has been extremely weak – has seen triple lock boost the value of the State Pension relative to both average earnings and prices.
In recent years, pensioners have seen their incomes rise at almost double the pace of the average worker.
The change would see an increase in the annual State Pension payment by £327, saving the taxpayer £3.5billion.
However, it would deny a historic boost to UK’s 12.4 million pensioners.
Ian Browne of Quilter, an investment group, said: The latest data suggest the Chancellor’s worst fears will become reality and he’ll either have to spend billions extra on the State Pension next year and forever after, or make a political challenging decision to tweak the triple lock or scrap it entirely.
Steven Cameron, of pension provider Aegon, said: If this trend continues, we could even it go into double figures, meaning if the triple lock is not fudged in some way, State Pensions could go up by more than 10 per cent. This would cost the Treasury up to £9bn, he estimated.