What is the triple lock pension and will it be scrapped?

THE triple lock sees the state pension rise by at least 2.5% every year.

We explain how it works, and if there are plans to scrap it following the coronavirus crisis.

Scrapping the state pension triple lock is thought to be one of the ideas being looked into to help pay for coronavirusCredit: PA:Press Association

What is the triple lock?

The triple lock is a calculation used to determine how much the state pension rises by each year.

It sees pension payments increase by the higher of:

earnings – the average percentage growth in wages in Great Britain
prices – the percentage growth in prices in the UK as measured by the Consumer Prices Index (CPI)
2.5%

For the current 2020/21 tax year, this saw payments for new retirees rise by up to £6.60 a week from a maximum of £168.60 a week to £175.20 a week.

Meanwhile the maximum basic state pension, which is for those with a national insurance record pre-April 2016, rose by £5.05 from £129.20 a week to £134.25 a week.

For the next tax year, 2021/22, the minimum 2.5% increase is expected to come into force after the pandemic kept both CPI inflation and earnings close to 0%.

If the triple lock comes into force, the new state pension will rise by £4.40 a week to £179.60 in April next year – an increase of £228.80 over the year.

The old basic state pension will increase by £3.40 a week to £137.65 – giving pensioners an extra £176.80 over 12 months.

The new state pension is for those who build up national insurance contributions after April 2016.

Ten years worth are needed to get the new state pension, while 35 years are needed to qualify for the full amount.

You need at least 30 qualifying national insurance years to get the basic state pension.

Is the triple lock being scrapped?

The government has previously ruled out scrapping the triple lock following suggestions it should be dropped to help pay for the costs linked to dealing with the pandemic.

Last month, it was reported that Chancellor Rishi Sunak was coming under increasing pressure to tweak the guarantee.

But so far, the Department for Work and Pensions has yet to confirm any changes to the triple lock.

There have been calls for the triple lock to be axed for years given its cost on public coffers – either becoming a double lock or being scrapped altogether.

Pension consultants LCP say applying the principles of the triple lock over two years rather than one would keep the promise while saving cash.

The triple lock was first introduced by former Tory Prime Minister David Cameron back in 2010.

But it’s popular with older voters which is perceived to be why successive governments have kept it in place despite its cost.

At the start of the crisis, the UK government pledged £350billion to help tackle coroanvirus.

Lockdown itself has cost the British economy £2.4billion a day, while new figures reveal the UK economy plunged by 5.8 per cent in March – the fastest monthly slump on record.

“That’s something that the Office of Budget Responsibility and the Bank of England have both said and… this year will face a significant rise [in our deficit].”

Steven Cameron, pensions director at financial provider Aegon added: “The fall out for the nation’s finances of the coronavirus will be significant.

“So it’s only right that the Treasury is beginning to think about what it needs to do to put the country’s finances back on a steady footing. It’s no surprise to see policies perceived by some as overly generous for certain groups on the list of expenditures that could be reduced.”

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This post first appeared on thesun.co.uk