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

Pensioners face may could face a ‘double whammy’ next April if the triple lock is broken again, losing out on £442 a year.

Under the triple lock, retirees should see their state pension boosted by a whopping 10.1 per cent next year if the government keeps its promise.

But with new Chancellor Jeremy Hunt slashing budgets and the Prime Minister refusing to confirm the Tory pledge on uprating pensions will be stuck to, there are fears that the triple lock could be axed again.

Steve Webb, This is Money’s pensions columnist and a partner at LCP said: ‘When the triple lock promise was broken in 2022, the Government insisted that this was a one-off measure because of the special circumstances of the pandemic.

‘It would be a high risk political gamble to break this manifesto commitment for a second year.’

Double whammy: There could be a double blow for pensioners as the Chancellor has also announced that universal help with energy bills will end in April 2023.

He added: ‘Many pensioners have faced a big squeeze on their standard of living this year following a very low pension increase in April 2022 and would have expected the April 2023 increase to help to catch up on the big rises in the cost of energy and food.

‘Breaking the triple lock could cost a single pensioner £442 per year. A reduced pension rise, combined with a cut in help on energy bills, could be part of a ‘double whammy’ for millions of pensioners.’

The triple lock guarantee means the state pension should be raised by the highest of September’s inflation figure, wages growth or 2.5 per cent.

But it was ditched last year because the Covid pandemic furlough scheme and then jobs recovery temporarily skewed the earnings figure.

Inflation rose to 10.1 per cent during the key month of September, the ONS revealed today, meaning if the figure is used, the full new state pension will go up by £18.70 per week to £203.85, whilst Basic state pension will go up from £141.85 per week to £156.20.

However, there are growing fears the government will row back on its triple lock pledge, despite Prime Minister Liz Truss highlighting her commitment to the triple lock on past occasions and in her leadership campaign.

Why is the triple lock under threat and when will we know?

As he took the axe to his predecessor Kwasi Kwarteng’s ill-fated mini-budget tax cuts this week, the new Chancellor Jeremy Hunt refused to be drawn on whether the triple lock would be used this year. 

Ominously, he said he would have to take ‘decisions of eye-watering difficulty’ amid looming spending cuts.

This was followed yesterday by reports that Liz Truss’ official spokesperson has signalled it is up for renegotiation.

While the inflation figure that sets the triple lock has now arrived, the rise does not kick in until next April. 

Experts believe that the Chancellor may keep pensioners waiting for confirmation of what will happen until the scheduled 31 October fiscal update that will lay out how the government plans to try to budget the books.

Mr Webb thinks the triple lock could be saved, saying ‘personally, I’m pretty sceptical they would scrap it’, but warned that the removal of the energy price guarantee limiting average household bills to £2,500 from April, combined with the end of the energy rebate, will already spell trouble for many pensioner households.

Caroline Abrahams, charity director at Age UK, said: If the Prime Minister decides to break her triple lock promise it would be devastating for the millions of older people who rely on the State Pension, which is only worth about £9,000 a year on average anyway, as their main source of income.

‘Knowing their State Pension would keep pace with rising prices because of the triple lock has given precious hope to many older people at a time of great anxiety; for the Government to take that away from them now would be a hammer blow, as well as a flagrant breach of trust.’

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

However, she and her government are now under pressure to do yet another u-turn due to the squeeze on public finances.

How much does the triple lock cost? 

Increasing the state pension by inflation rather than average earnings would cost the Chancellor an estimated £4bn-£5bn

Tom Selby, head of retirement policy at AJ Bell said: Ditching the triple-lock, a 2019 manifesto commitment, for the second year in a row, and hitting millions of retirees directly in the pocket in the process, would surely deal another hammer blow to the Conservatives in the polls.

‘On the other side of the debate, recently installed Chancellor Jeremy Hunt has been tasked with restoring faith in the UK’s fiscal plan and is going over all spending commitments with a fine-tooth comb. In that context, providing a 10.1 per cent state pension increase may be viewed as an eye-watering cost.

Jeremy Hunt (pictured) admitted he had to take ‘decisions of eye-watering difficulty’ amid looming spending cuts, sparking fears that the pledge to raise pensions could be at risk.

What could breaking the lock mean for pensioners?

The legal minimum increase in the state pension (without separate legislation) would be to increase it only in line with average earnings.

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

This means if pensions rose by earning weather than CPI inflation, the weekly new state pension would be around £8.50 per week lower, and the annual loss would be £442

There could be a double blow for pensioners as the Chancellor has also announced that universal help with energy bills will end in April 2023, suggesting that pensioners not on benefit could see their real income squeezed just as their outgoings soar.

This comes on top of a very low state pension increase of just 3.1 per cent in April, when inflation was already 9 per cent, indicating the extent of the squeeze which pensioners have already faced this year.

This post first appeared on Dailymail.co.uk