Sunak hints triple lock is under threat
Covid could see pensions rise 8%
BORIS Johnson and Rishi Sunak have signalled that they are ready to suspend the triple lock on pensions this year, to avoid an eye-watering bill to taxpayers.
Experts have warned the state pension could rise by eight per cent because of a freak rise in average earnings caused by the pandemic.
The move would cost the Treasury an additional £3billion a year.
Under the terms of the triple lock, the Government is committed to increasing pensions by average earnings, inflation or 2.5 per cent, whichever is higher.
But the Chancellor yesterday suggested this year’s rise could be reviewed to ensure it is ‘fair to taxpayers’ who have to foot the bill. He was backed by the Prime Minister who so far has resisted any attempt to water down the triple lock manifesto pledge.
The development suggests the Treasury is winning the argument within government that the unprecedented circumstances could hand pensioners an unjustified bonus.
Average earnings look set to be driven artificially high this year as people who were furloughed on 80 per cent of their wages go back to work.
Another factor has been the high level of redundancies among younger people in lowpaid jobs, which helped drive average earnings higher. Economists have forecast that average earnings for the crucial May-July period, which is used to calculate pensions, could be up eight per cent on last year. The triple lock is the Government’s policy but I very much recognise people’s concerns,’ said Mr Sunak. ‘I think they are completely legitimate and fair concerns to raise.’
The Chancellor declined to rule out an alteration to the commitment to keep the triple lock. He said the Government must ‘wait for the actual numbers to be finalised’ before looking at the policy ‘properly at the appropriate time’.
He was echoed by Mr Johnson, who said: ‘I think we have got to have fairness for pensioners and the taxpayers.’
Former pensions minister Sir Steve Webb, now a partner at financial firm LCP, said ministers could try to limit the rise by averaging it over two years or by asking the Office for National Statistics to calculate underlying earnings growth.
But he said the Government was likely to have to change the law which mandates a link to earnings.
‘There is a case for smoothing it out this year,’ he said. ‘I would like to see the triple lock stay because the state pension is low in this country and for many people it is all they have got.
‘But the upheaval of the last year and the impact it has had on earnings is not something that was ever anticipated.’
Baroness Altmann, another former pensions minister, said a wider review was needed.
She said: ‘Removing the earnings link because of one year’s numbers would be yet another short-term, politically inspired reform to a policy that needs long-term and holistic reconsideration.’