Chancellor ready to target the triple-lock on the state pension

THE Chancellor is preparing to scrap the triple-lock on the state pension amid concerns the coronavirus financial crisis could make it unaffordable, it was claimed last night.

The triple-lock was introduced to protect the state pension against inflation. It guarantees the state pension will rise annually by whatever is the highest of price inflation, average earnings growth or 2.5 per cent. The Conservative party pledged not to scrap it in its manifesto.

Rishi Sunak has been warned that unless he breaks the pledge, the value of the state pension could rise sharply.

Some figures inside the Treasury have formed the view that the triple lock needs to be suspended for at least two years. Boris Johnson has told Mr Sunak that any new formula for upgrading the state pension should include safeguards for pensioners, the Financial Times reported.

The Government needs to announce a suspension of the triple lock soon said, Paul Johnson, director of the Institute for Fiscal Studies.

“Earnings next year compared with 2020 could well go up enormously if lots of people move from 80 per cent pay on furlough to 100 per cent of pay or lots of low-paid jobs disappear,” he added. Rishi Sunak will find reviewing the costly pledge “irresistible”, Sir Steve Webb, who was pensions minister under the Coalition, said on Monday.

If the UK goes through a period of deflation – when inflation turns negative and overall prices fall – the government is likely to review the pledge, according to Sir Steve, who is now a partner at pension consultants LCP.

Modelling by LCP predicts inflation may turn negative in September unless the economy goes through a “strong recovery” before then.

Number 10 and the Treasury said in a joint statement: “Announcements on tax and pensions policy are for Budgets. The government is committed to supporting pensioners.”