What is the pension triple lock? Meaning of UK government guarantee on state pensions - and when it returns
The Chancellor Rishi Sunak has defended the policy in the face of pay-related rail strikes and the cost of living crisis
Pensioners are set to get a major boost to their incomes in 2023 after the UK government brought back the pension triple lock for the 2023 financial year.
However, some pensioners could face a tough time before the policy returns as pensions only rose by 3.1% in April - just over a third of the current rate of inflation.
So what is the triple lock - and how much more money will pensioners get?
Here’s everything you need to know.
What is the pensions triple lock?
The pensions triple lock was a policy brought in by David Cameron’s Conservative/Liberal Democrat coalition Government in 2010 and has been a key policy for Tory administrations ever since.
It is a policy that governs how much state pensions rise by and essentially guarantees that pensioners will never see their income fall.
As its name suggests, the triple lock has three things against which pension rises are guaranteed:
- Inflation (as measured by the Consumer Price Index (CPI))
- The average wage increase
State pensions will go up by whichever of these three things is highest, with all three mechanisms having been used since the policy’s introduction.
The triple lock was suspended for a year in September 2021 as the Government feared Covid would lead to wage increases of 8.8% (incidentally, this is a similar figure to that which CPI inflation is now expected to hit).
This was because people were returning to full-time work having been placed on furlough - which lowered the average wage - during the pandemic.
For the 2022/2023 financial year, it meant the triple lock became a double lock - guaranteeing pensions against inflation or the 2.5% figure.
This broke a 2019 Conservative manifesto promise to keep the triple lock in place for the duration of its term.
But in March, Department for Work and Pensions Secretary Therese Coffey confirmed the return of the triple lock for the next financial year, which begins in April 2023.
How much more money will pensioners get?
Inflation has soared since the rate for this year’s double lock pensions was announced and then implemented.
This financial year’s rate of 3.1% is just over a third of the record May 2022 figure for inflation of 9.1%.
Basing figures on the full new state pension, pensioners currently receive 185.15 a week (an extra £5.55 per week or £288.60 a year compared to the year before).
But when the 2022/23 financial year ends, pensioners could be in line to receive a rise of around 10% - £203.67 a week (an extra £18.52 a week or £962.78 a year).
This is because inflation is expected to hit 11% in the autumn when Ofgem’s new energy price cap is introduced, and the benchmark for pensions is taken in September.
However, economists believe the cost of living crisis will have lessened by spring 2023 when the new pension rate will come into force, potentially meaning pensioners are remunerated well above the rate of inflation.
What has Rishi Sunak said about pensions?
The Chancellor Rishi Sunak has been forced to defend the return of the triple lock pension policy, after criticism that it’s being reintroduced while workers are being forced to accept a real-terms pay cut.
Speaking to BBC Radio 4, Lord O'Neill - an economist and former Conservative Treasury minister who now works for Labour - said he had "no idea" why the triple lock had been restored.
"The constant protection of pensioners seems ludicrous in itself and in these circumstances [during a cost of living crisis and rail strikes] is particularly crazy," he said.
Rail workers are striking over pay and conditions, while public sector workers like nurses and teachers are considering strike action over taking real-terms pay cuts.
Mr Sunak has said pensioners are “among the most vulnerable in society” and therefore need to be protected.
He added that the government had implemented a support package which was "generous and well-targeted at those who need our help".