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Pensions triple lock scrapped as another Conservative manifesto pledge broken

LONDON, UNITED KINGDOM - SEPTEMBER 07, 2021: Secretary of State for Work and Pensions Therese Coffey leaves Downing Street in central London after attending the first in-person Cabinet meeting this year following the return of Parliament after summer recess on September 07, 2021 in London, England. (Photo credit should read Wiktor Szymanowicz/Barcroft Media via Getty Images)
Secretary of state for work and pensions Therese Coffey said the move is to stop pensioners 'unfairly benefiting from a statistical anomaly.' Photo: Wiktor Szymanowicz/Barcroft Media via Getty

The pensions triple lock pledge has been scrapped for the 2022/23 financial year in another break of pledges made in the Conservative party manifesto.

The moves announced today mean that pensions will not rise by 8% next April, but will instead rise by the rate of inflation, which currently stands at 2.5%.

The triple lock ensures the state pension will increase in line with either the rate of inflation, wages, or 2.5% — whichever is highest.

Pensions secretary Theresa Coffey said it is to stop pensioners "unfairly benefiting from a statistical anomaly."

This will be part of the Social Security Uprating and Benefits Bill for 2022-23 only.

Read more: How much extra income could you have if you work past retirement age?

"It will ensure the basic and new state pensions increase by 2.5% or in line with inflation, which is expected to be the higher figure this year, and as happened last year, it will again set aside the earnings element for 2022-23 before being restored for the remainder of this Parliament," she said.

Strong growth in earnings and spiralling inflation had already prompted concerns that remaining wedded to the guarantee would be problematic. It could have left the Treasury with an additional pension bill of £4bn ($5.5bn).

Any changes to pension tax reliefs were expected to be announced in the autumn budget.

"The triple lock has played a role in boosting the incomes of pensioners over the past decade, but the current situation has exposed its flaws," said Helen Morrissey, senior pension and retirement analyst at Hargreaves Lansdown.

"While the suspension is only for a year, the time has come to look at whether the triple lock is fit for purpose and remains the best way to preserve the long-term value of the state pension.”

Read more: Top five reasons why the pensions triple lock has to stay

This is the second Conservative party manifesto pledge break announced on Tuesday. Earlier, prime minister Boris Johnson said the government will raise national insurance (NI) by 1.25 percentage points. He also said that dividend rates are to increase by the same amount.

This breaks a manifesto pledge not to increase national insurance contributions (NICs), income tax or value added tax.

Watch: When should I start paying into a pension?