Earlier this week, the Chancellor Jeremy Hunt confirmed in his Autumn Statement that the triple lock will fully return. As a result, the state pension will rise in line with the Consumer Price Index (CPI) rate of inflation from September. Pensioners will now see their weekly payments increase to over £200 with financial experts claiming it is the “right thing to do” as the cost of living rises.
What is the triple lock?
Back in 2010, the Government made a pledge to raise state pensions by either inflation, average earnings or 2.5 percent every year; whichever is the highest figure for the September before.
However, this triple lock promise has been temporarily suspended for the last year due to wages being artificially inflated as a result of the furlough scheme introduced during the pandemic.
To save money, the Government opted to scrap the link to average earnings. This decision meant that state pension payments only rose by 3.1 percent despite inflation skyrocketing in the meantime.
With inflation hitting 10.1 percent last month, the Government initially appeared hesitant to bring the triple lock fully back but Mr Hunt outlined that state pensions will in fact receive a rate hike of this magnitude next year.
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How much will the state pension be?
Currently, the full new state pension is £185.15 per week and is available to Britons once they reach 66 years of age. In comparison, the full basic state pension comes to £141.85 per week.
When the inflation-hiked rate of 10.1 percent is applied, full new state pension payments will rise to £203.85 weekly. The basic state pension is set to increase £156.20 a week with the triple lock return.
It should be noted that the basic state pension is available to those who turned the state pension age prior to April 2016. The age threshold for the retirement payment regularly changes and will rise to 67 between 2026 and 2028.
Speaking exclusively to Express.co.uk, Ray Black discussed the impact of the triple lock being reinstated for the millions of older households across the country who reply on their state pensions every year.
The managing director of chartered financial planning firm, Money Minder, addressed the reasoning behind the Government’s decision and why it was “the right thing to do” for pensioners.
Mr Black explained: “I actually thought that that was one of the areas where they could save some money by restricting it in the same way they did last year. But, there was a danger there because it would upset the pensioners that were given this promise back in 2010.
“There was a difficult decision for them to make there. Do you upset a big chunk of the voting public by not putting it up? Or do you stay true to the promises that you made previously, and knowing that it’s going to cost more money to actually deliver it?
“I’m glad they went with the latter in the end, because there are still too many people in their retirement with mortgages. There are people in retirement that are renting and the rents have been going up. It was the right thing to do.”
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Money Minder’s financial director shared why older people are at particular financial risk as the cost of living crisis continues to diminish peoples’ finances and savings.
The finance expert added: “Pensioners are dealing with higher food costs, higher energy costs, they’re not in a position anymore where they can go out to work and take on an extra few hours or do a bit of overtime.
“Some will be completely reliant on their state pension and there’s very little else. Especially over the last few years where some may have drawn out smaller pension funds, and then spent that on home improvements or trying to get the mortgage down.
“As much as we talk about some of the younger members of society being quite vulnerable from rent inflation, prices, inflation, especially those with mortgages and seeing their mortgages going up.
“There’s the other end of that coin as well, where there’s plenty of vulnerable people in the pension age group.
“The last thing you want is pensioners to be finding themselves in complete poverty, and not being able to cover their bills, and with no ability to actually do anything about it either.”
On top of the announcement of the triple lock’s return, Mr Hunt confirmed that other benefit payments will rise by 10.1 percent. These changes will be implemented in April 2023