"The Government seems certain to use its comfortable majority in the Commons to overturn this defeat in the House of Lords."
Former pensions minister Baroness Ros Altmann challenged the Government on its decision to replace the state pension 'triple lock' with a 'double lock' for the next financial year.
Under the Government's plans, pensioners would get an increase of 3.1% using inflation after the pandemic caused a temporary spike of 8% in earnings.
However, Lords backed the amendment by Baroness Altmann who is seeking a middle ground increase to the state pension.
Under Altmann's amendment, the government would be required to retain the ‘earnings link’ element of the triple lock but would be allowed to use an ‘underlying’ earnings growth figure which stripped out the effects of the pandemic rather than the ‘headline’ 8.3% figure produced by the Office for National Statistics. This is expected to be around 5%.
However, according to LCP partner and former pensions minister Steve Webb, the Government is ‘certain’ to overturn the defeat when the issue now comes back to the House of Commons for further debate.
Steve Webb said: “Even though no government likes being defeated in the House of Lords, sometimes they will consider a concession in order to get their legislation through. But on an issue like this, there seems no prospect of a government concession when MPs are asked to consider the issue again. An alternative measure of earnings growth could lead to a multi-billion pound bill which could cause the Chancellor to re-write his Budget. By convention, the House of Commons has supremacy when it comes to financial matters and the Lords will come under great pressure to back down if the Commons simply vote down today’s amendment. The Government seems certain to use its comfortable majority in the Commons to overturn this defeat in the House of Lords. But it is a sign that any attempt to drop the triple lock for more than one year could meet some stiff resistance."
Steven Cameron, pensions director at Aegon, commented: “Most would agree maintaining the state pension triple lock in its unadjusted form would fail the test of intergenerational fairness, granting pensioners an unrealistic increase of over 8% resulting from distortions in earnings growth figures during the pandemic. But during a period of economic volatility and inflation expected to average 4% over the coming year, it’s becoming increasingly clear that the government may have been too hasty to pull the trigger on the triple lock entirely.
“With the earnings distortions evident over the spring and early summer, we alongside many pensions experts offered suggestions for a fairer approach, allowing the government to keep its manifesto commitment of maintaining the spirit of the triple lock while ensuring pensioners aren’t left out in the cold. These include smoothing out increases in earnings over a two or three year period or basing the increase on an earnings growth figure calculated by the official statisticians with the pandemic distortions stripped out.
“While 8.3% continues to look extremely generous, 3.1% is now looking harsh against the broad acceptance we’ll see sharp winter rises in the cost of living as well as in heating costs which disproportionately affect pensioners. The vote on the triple lock will now go back to the government where MPs may now be persuaded to look again at a fairer middle ground.”