The triple lock State Pension could potentially be radically changed in the upcoming months as the Treasury faces increasing financial pressure. The triple lock has set the state pension level for each of the last 10 years. But how does it actually work and could this system be under threat?
The Chancellor of the Exchequer Rishi Sunak is poised to remove the State Pension triple lock in the wake of the coronavirus pandemic.
In total, removing this triple lock system could save the UK about £4billion each year.
This may raise much-needed revenue but could force pensioners into financial hardship.
In April, the Social Market Foundation said a key element of the trip lock on State Pension could be scrapped to save £20billion.
In total, the Government is expected to have to deal with an expected £300billion bill from the pandemic.
The triple lock was intended to lift pensioners out of poverty and has gone some way to achieving that aim.
The SMF has argued “in the post-crisis world of slow, painful recovery, a triple lock ensuring a 2.5 percent minimum rise in pensions would constitute enormous generosity to pensioners, at a time when working-age adults face low or no wage growth and significant unemployment”.
The think tank argued the huge cost of the coronavirus crisis should be shared fairly across the UK population, between working people and retirees alike.
The SMF has instead proposed introducing a double lock system.
However, Foreign Secretary Dominic Raab told LBC the Government has no plans to remove the triple lock pension promise.
He told LBC: “We’ll keep all our manifesto commitments. We have no plans to touch the triple lock.
“Of course, I don’t want to pre-empt the Chancellor’s Budget.”
What is a double lock system?
The SMF has proposed an alternative to the triple lock system which would see the 2.5 percent minimum rise be removed from the guarantees.
Instead, the guarantee would only involve the two options: the rate of inflation and average earnings growth.
The State Pension continues to rise in line with either wage growth or the Consumer Prices Index (CPI), whichever is higher.
Experts have said, the effects of removing the triple lock might not be felt so much by the generation currently retired, but by those due to retire over the next 10 to 20 years.
Published at Thu, 18 Jun 2020 15:31:00 +0000