Boris Johnson faces a political storm over one of his most totemic and expensive policies – the pensions triple lock.
A quirk of Covid means pensioners could end up getting a 6% rise in payments in April 2022, while other Brits get far less.
Today, No10 suggested the triple lock will not be scrapped despite fears the rise will cost UK taxpayers billions of pounds.
But there are still ways pensioners’ futures may be uncertain, and we don’t know all the facts yet.
You’ve probably heard the phrase ‘triple lock’ a lot but seldom been given an explanation of what it means, or why it’s become an issue.
So we’ve decided to explain those issues in a nutshell:
What is the pensions triple lock?
The ‘triple lock’ has run since April 2011 and guarantees bumper pension rises each year.
Under the policy, state pensions rise every April by whichever is highest out of:
- Inflation. This is usually Consumer Prices Index (CPI) inflation in the year to the previous September.
- Earnings. Usually the rise in average weekly earnings in the year to the May-July period the previous year.
- 2.5%. If this set figure is higher than either of inflation or earnings.
It was actually proposed by the Lib Dems in the 2010 election but became policy as part of the Coalition deal.
Since then, Tory governments have taken on the triple lock as their own and repeatedly pledged to keep it, including in the 2019 general election.
Why is it facing a threat this year?
The specific way the triple lock is calculated has posed a massive problem due to Covid.
In May-July 2020, average weekly earnings actually FELL by 1% compared to the same period in 2019 – partly because so many people were on 80% or less of their usual pay due to furlough.
This means average weekly earnings are now “artificially” bouncing back this year as people come off furlough.
In February-March 2021, earnings grew by a whopping 5.6% compared to the same period the year before.
This steep rise doesn’t mean Brits are wildly richer than before Covid.
But it means pensioners will enjoy the full “bounce back” at a cost of billions to taxpayers – even though they didn’t share in the fall last time around.
In April this year, pensioners got a 2.5% rise while working-age benefit claimants (based on inflation) got just 0.5%.
Will the government axe the triple lock?
Not completely, no. Apart from anything, it’s generally seen as electoral suicide to withdraw pensioner benefits, especially when they were solemnly promised.
The 2019 Conservative manifesto said bluntly: “We will keep the triple lock.”
The Prime Minister’s spokesman said today: “We made a commitment around the triple lock.
“The government made a commitment at the last election, and plans to stick to that commitment.”
Could it be sneakily changed or suspended?
Here’s where it gets more complicated. Despite ministers’ insistences, the answer could technically be yes.
For example, it is in ministers’ power to change the exact way in which “earnings growth” is calculated. There is no suggestion this option is under active discussion.
Another option is suspending the triple lock for a year – like the government has with its pledge to spend 0.7% of national income on foreign aid.
No10 left wriggle room today, saying: “It is important to say that the final figures are still unclear and the uprating work takes place in the annual review, which takes place later this year.”
Is the triple lock fair?
It’s a political choice. Whether it is fair depends on your opinion.
Many say pensioners have paid into the system for decades, and deserve to be treated with dignity and the guarantee of a good life. Others argue pensioners should share the burden of cuts when cuts do come, and point out that today’s young people won’t enjoy the same standard.
What’s not in doubt is that pensioners have done pretty well out of the triple lock compared to cuts elsewhere in public life.
The basic state pension’s value as a percentage of average earnings fell dramatically under Margaret Thatcher, from a peak of 26% in 1979 to 16% between 2000 and 2007.
But it’s since risen from 17% to to 19% of average full-time earnings by 2020 thanks to the triple lock, despite cuts elsewhere.
So while pensions are not worth what they once were, they’ve risen steadily throughout a decade of Tory austerity.
And essentially, that means working-age taxpayers are currently forking out more as the years go on to support the pensioner population.