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Rishi Sunak mulls suspending triple lock on state pensions

·3-min read
Rishi Sunak - Getty Images
Rishi Sunak - Getty Images

Rishi Sunak is considering a temporary suspension of the Conservatives’ "triple lock" election manifesto commitment on state pensions that would save billions by linking this year’s rise to inflation instead.

The lock commits the Chancellor to lift payouts to match the highest out of average earnings, inflation or 2.5pc.

However, the impact of the furlough scheme last year is likely to leave wages more than 8pc higher than last year, adding more than £7bn to the state pensions every year if fulfilled.

It is understood one option being examined by Mr Sunak’s officials is a "double lock" for one year only, which would raise pensions by the larger of 2.5pc or September’s Consumer Prices Index inflation.

Consultant Capital Economics predicts CPI of 3.1pc for September, but average earnings growth of 8.5pc for the quarter to July. Using inflation would add £2.6bn to the pension bill, barely a third of the estimated £7.2bn cost of using this year’s earning figures.

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Other options under consideration include using Office for National Statistics estimates of wage growth stripping out the effect of the pandemic, or taking an average of earnings over two or three years.

Mr Sunak has been sounding out Conservative MPs over options for the triple lock ahead of a final decision next month.

One senior MP told The Telegraph: “A huge rise would be unjust and we must have an exception.”

But even temporarily breaking the link with earnings abandoned by the Conservatives in 1980 and re-established under the Coalition in 2010 would be controversial and risks provoking the ire of pensioner groups.

Caroline Abrahams, charity director at Age UK, said there was a “copper bottomed argument for keeping the triple lock now and far into the future” due to the UK’s less generous pension provisions than other countries.

She said: “It is not surprising that some policymakers are arguing for a different approach on a one-off basis. However, it’s asking a lot for older people to believe that any scaling back of the triple lock would only be temporary, rather than permanent.”

Jan Shortt, general secretary of the National Pensioners’ Convention added that almost two million pensioners were living in poverty, including 1.1 million in severe poverty.

She said: “The triple lock is a manifesto promise and they should keep that promise. They should also do what we have consistently asked them to do, which is to sit around the table and have an honest debate about pensions and the future of pensions.”

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Steve Webb, a former pensions minister who signed the earnings link into law a decade ago, said Mr Sunak could shrink from cutting it even temporarily.

He said: "The Chancellor will no doubt be considering a wide range of options to avoid a hike in the state pension. Dropping any earnings link would be quite controversial as ‘restoring the earnings link’ has always been a rallying cry for the pensioner movement.

"It would also be an explicit breach of the Conservative manifesto. I suspect that a modified earnings figure will remain the most attractive option to a Chancellor who will want to avoid opening up battles on too many fronts at the same time."

A Treasury spokesman said: "We recognise legitimate concerns about potentially artificially inflated earnings numbers impacting pensions uprating. We will ensure that decisions on pensions are fair for both pensioners and taxpayers."

The Office for Budget Responsibility will publish its latest forecasts for the public finances on October 27, after the triple lock decision has been taken – with a potential spending review or Budget likely to be pencilled in for the same day.

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