"The last few months have upended the lives of all generations, so this commitment to keeping the triple lock in place will come as a huge relief as the cost of living continues to increase"
Chancellor Jeremy Hunt has confirmed that the pension triple lock will remain in place, despite soaring inflation.
Speaking during today's Autumn Statement, Hunt said: "We will fulfill our pledge to the country to protect the pensions triple lock. In April the State Pension wil increase in line with inflation which represents the biggest ever increase in the State Pension."
Protecting the triple lock means pensions will rise in line with inflation which was 10.1% in September, traditionally the figure used to calculate the following April's pension rise. The move is thought to mean that pensions will cost the government an additional £4bn - £5bn in comparison with raising the pension rate in line with average earnings.
Previous prime minister Liz Truss said she was 'committed' to protecting the pensions triple lock pledge, but when Jeremy Hunt was appointed chancellor, he said he could not commit to raising state pension payments in line with inflation.
Will Stevens, head of wealth planning at Killik & Co, said: “For the large number of pensioners who fully rely on the State Pension, and even those with additional private and workplace pensions who were looking to retire in the next few years, experiencing exceptional volatility when it comes to the value of their retirement pots, this will be welcome news.
“The last few months have upended the lives of all generations, so this commitment to keeping the triple lock in place will come as a huge relief as the cost of living continues to increase, hitting households hard.
“Those already receiving the State Pension will see the real value of their pensions continue to rise in line with inflation, at least for the time being. However, for most the State Pension, even if it keeps up with inflation, will not be enough to maintain a comfortable retirement. It is also unclear how long the triple lock will remain in place. This means that everyone must consider their expenditure, particularly those who are already retired as this is what is in their immediate control."
Jon Greer, head of retirement policy at Quilter, commented: “Following weeks of mounting concern, pensioners across the country can breathe a sigh of relief as Chancellor Jeremy Hunt has finally put the rumours to rest and confirmed that the government will honour its manifesto promise of keeping the triple lock in place for the 2023-24 tax year.
“Pensioners suffered a miserly 3.1% increase in the State Pension in April 2022 after the triple lock was scrapped last year following an anomalous rise in earnings and have increasingly struggled to make ends meet as inflation continued to rise and their purchasing power was diminished. The triple lock commitment will see the full new state pension – for those reaching state pension age from 6 April 2016 – rise to £203.85 per week, or £10,600.20 per year as a result of the 10.1% inflation figure seen in September.
“Committing to the triple lock will be extremely costly to the Treasury, but given soaring inflation, the alternative would have been too politically damaging. Inflation has already increased by a further 1% to 11.1% since the triple lock inflation linked increase was set in September, so the government had to act to prevent more pensioners from slipping into poverty as everyday costs soar.
“While the government has confirmed the triple lock has been reinstated for now, there is still a chance we could come across the same issue next year. The Bank of England has predicted inflation may drop to 7.9% by Q3 next year, so keeping the triple lock in place may prove less expensive from 2024. However, given the turbulence in government decision making we have seen in recent times, we know there are no real guarantees that the triple lock will go untouched for a second year.
“Reinstating the triple lock this year was ultimately the right move and it will go a long way towards supporting pensioners through these challenging times. However, the triple lock does not work for everyone, and perhaps it is time the government assessed whether there is a fairer way to raise the state pension going forward, while preventing more people slipping into the poverty net and having to choose between heating or eating.”
Steven Cameron, Pensions Director at Aegon, added: “Today’s confirmation of honouring the triple lock for 2023/24 means pensioners can breathe a huge sigh of relief after a white knuckle roller coaster ride of past disappointments, new promises and a series of U-Turns. But next year’s increase could be its ‘last gasp’ as the current formula is looking increasingly unsustainable.
“Financially, it won’t have been an easy decision for the government looking to fill a £50bn fiscal black hole – every 1% increase in the state pension costs around £0.9bn a year. And this isn’t paid for out of some fund built up in the past but from the National Insurance paid for by today’s workers.
“Honouring this Manifesto commitment after ditching it last time round will provide much needed support for pensioners, many of whom are on low and fixed incomes and particularly vulnerable to rampant inflation. The government will no doubt have weighed up the reaction of pensioner voters if they scrapped the triple lock for a second consecutive year in the run-up to the next general election.
“But there’s a huge question mark over whether any party would recommit, in a future Election Manifesto, to paying the highest of price inflation earnings growth or 2.5% year on year. In volatile times, using an average over three years or even paying out the average of inflation and earnings increases each year might be more sustainable for Government and predictable for pensioners.
“The outcome of the review of state pension age is also to be published early in 2023 and on affordability grounds, this needs to be considered alongside the future of the triple lock."
