Average earnings growth figures will not be used to up-rate pensions in the next financial year, it has been announced.
The Government said suspending the “triple lock” ensures fairness for pensioners and taxpayers.
Launched in 2010, the triple lock ensures that the state pension increases each year in line with whichever of inflation (measured by the Consumer Prices Index), the average wage increase, or 2.5 per cent is highest.
But this week’s changes mean that the wages element of the triple lock will be scrapped for one year “to avoid a disproportionate rise in the state pension following the pandemic”.
According to statistics, the estimated average growth in earnings is estimated to be between eight and 8.5 per cent this year, potentially resulting in a difference of around £4 or 5 billion in basic and new state pensions expenditure in 2022/23, when comparing with the higher of 2.5 per cent or expected price inflation.
This means pensioner income would increase substantially, while young people – who have been hit hardest by the pandemic – will continue to face financial pressure.
The state pension will instead increase by the higher of inflation or 2.5 per cent.
Commenting on the decision, the Government said: “This new legislation is a one-year response to exceptional circumstances and the government plans to return the earnings element of the Triple Lock next year.”
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