Triple lock is confirmed: State pension will rise 10.1%

Pensions minister Alex Burghart confirmed that the Government would stick by its triple lock pledge today

The state pension will rise by 10.1 per cent from next April after the Government confirmed it will stick by the triple lock promise.

The full state pension for those retiring after April 2016 should now rise to £203.85 per week or £10,600 per year – taking it above the £10,000 benchmark for the first time.

The old basic state pension should rise to £156.20 per week or £8,122.40 per year.

Thanks to the announcement, pensioners dodged a ‘double whammy’ of broken promises that could have cost them £442 a year.

Yesterday, reports suggested the Chancellor Jeremy Hunt might be preparing to axe the triple lock.

However, during PMQs earlier today, Liz Truss said that she and the Chancellor are completely committed to the triple lock meaning that pensions should now keep up with rising living costs.

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.’

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.’

What is the triple lock and how much will people get? 

The triple lock guarantee means the state pension should be raised by the highest of September’s inflation figure, average wage 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.

During the Conservative leadership campaign, Liz Truss promised to reinstate it this year. 

Inflation rose to 10.1 per cent during the key month of September, the ONS revealed today, whereas the average wage growth figure used would have been 5.5 per cent. Both are much higher than the 2.5 per cent backstop.

This means the full new state pension, which goes to those who retired after April 2016, will go up by £18.70 per week to £203.85, whilst the older basic state pension will go up from £141.85 per week to £156.20.

Why was the triple lock under threat?

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 had signalled that the triple lock was 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 thought that the Chancellor could keep pensioners waiting for confirmation of what would happen until the scheduled 31 October fiscal update, which will lay out how the Government plans to balance the books.

Today, the Conservatives moved quickly to stem rumours that it would be axed and confirmed that the triple lock would be maintained, with the Prime Minister saying so in Parliament and the Pensions Minister tweeting ‘Confirmed’ and an image saying the state pension promise would be stuck to. 

Mr Webb forecast the triple lock would be saved, telling This is Money: ‘Personally, I’m pretty sceptical they would scrap it’.

But Webb 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 still spell trouble for many pensioner households.

Caroline Abrahams, charity director at Age UK, said: ‘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.’ 

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

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: ‘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.’

What would 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

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