Retirees are heading for a bumper increase to their state pension next year after Prime Minister Liz Truss said the triple lock is being protected.
Speaking in the House of Commons, Ms Truss insisted that “we are protecting the triple lock on pensions”.
It was feared that pensioners could miss out on £8.50 per week or £442 per year in income if the state pension is increased in line with earnings next April instead of with inflation.
The triple lock is normally used to calculate the increase in the state pension but it was suspended for a year last year and state pensions instead rose by 3.1%.
The mechanism would guarantee that state pensions increase by September’s inflation figure, wages or 2.5% – whichever is higher.
When I said this morning I fully expected them to keep the triple lock, I assumed they would keep us guessing more than about three hours….
— Steve Webb (@stevewebb1) October 19, 2022
Consumer Prices Index (CPI) inflation rose by 10.1% in September, according to Office for National Statistics (ONS) figures released on Wednesday showed.
Earlier, Sir Steve Webb, a former pensions minister who is now a partner at LCP, had said that if the triple lock was maintained and pensions rise in line with inflation, the new state pension would rise from £185.15 per week to £203.85.
It would be the first time that the main state pension rate had exceeded £10,000 per year, he said.
But if the state pension were to rise at 5.5%, in line with earnings, the weekly new state pension would have been around £8.50 per week lower than this, adding up to an annual loss of £442.
Sir Steve had also warned there could be a double blow for pensioners as new Chancellor Jeremy Hunt has said universal help with energy bills under the energy price guarantee will only continue until April 2023, instead of the two years that was previously pledged.
A Treasury-led review will be launched to consider how to support households with energy bills from April 2023.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “In the latest twist in the triple lock saga, Prime Minister Liz Truss has again re-iterated commitment to the state pension triple lock which means pensioners could be in line for a 10.1% increase next year.”
She added: “The uprating doesn’t tend to be confirmed until November, but this announcement will come as a huge relief to pensioners who have been banking on an inflation linked increase after their budgets have come under intolerable pressure in recent months.
“The Prime Minister had said she would keep the triple lock several times during her leadership campaign, but there were concerns that when faced with a gap in public finances the new Chancellor might be tempted to shelve an inflation-linked increase.
“After such a trying time, pensioners need certainty about how their state pension will be uprated, and there still may be worries that given the pace of U-turns we have seen, this latest promise can’t be guaranteed.
“Longer term, we may well see calls to reform the triple lock increase, but any such reform will need to happen alongside consideration of how state pension age is due to be increased.
“A review on this issue has been submitted to Government and is due to be published next year. Any changes to the triple lock will need to take its findings into account.”
Baroness Ros Altmann, another former pensions minister, said the commitment for the coming year must be honoured.
She said: “Changes to pension spending should not be managed in this haphazard way.”
Baroness Altmann added: “It is undermining (pensioners’) mental wellbeing, causing huge anguish, and undermines the whole basis of our welfare state social contract, where people have paid national insurance for decades to provide their pensions in later life.”