Should the triple lock give an 8% state pension rise?

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This is Money

Business News, Business, Investing, News

4.1 • 650 Ratings

🗓️ 10 July 2021

⏱️ 49 minutes

🔗️ Recording | iTunes | RSS

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Summary

The triple lock has always been a hot potato but things have stepped up another gear as it could deliver a bumper 8 per cent state pension increase due to a statistical quirk.

The state pension pledge means that payouts rise by the greatest of inflation, wage growth or 2.5 per cent.

Yet, wage growth numbers are being skewed this year because the Covid crash a year ago saw millions put on furlough on a maximum of 80 per cent of earnings, workers suffer temporary pay cuts, and many lose their jobs.

Job cuts disproportionately hit the low paid and continue to do so, taking them out of the figures and bumping up the average wage, workers coming back from furlough are seeing pay go back up to their full amount, and short-term pay cuts have been reversed.

All this makes average wage growth look artificially high, despite many public and private sector workers suffering pay freezes or negligible rises.

The Office for Budget Responsibility forecast that distortion could lead to an 8 per cent wage growth figure in the month the triple lock reading is taken from, delivering a £14 weekly increase to the state pension and £3billion bill.

Is it fair for pensioners to get a bumper increase based on a distortion caused by the pay pain suffered by workers in lockdown? Some say ‘no’, others say ‘stick to the deal’.

On this week’s podcast, Tanya Jefferies, Georgie Frost and Simon Lambert look at what is causing the triple lock anomaly and what the Government might do. Will they pay up or fudge it?

Also this week, the painful cases of those who cannot afford funerals for loved ones, the return of gazumping to the property market, and finally, the crazy NatWest banking rule that has forced a reader to have their employer’s bank accounts mixed with theirs in online banking.

Transcript

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0:00.0	Welcome to This Is Money podcast. I'm Georgie Frost and alongside me and editor Simon Lambert. Today is
0:04.9	pensions and investment editor Tanya Jeffries. And coming up, is it time to unpick the triple lock?
0:11.8	Plus, more and more savers have been caught out by putting too much away for their retirement.
0:16.4	We look at the councils who won charity says are failing families who can't afford a funeral for their loved
0:21.4	ones, but should we gizump the gzumpers? And we have a read a case of proper bank says no madness.
0:29.0	Don't be getting it's up to date. With all the latest breaking money news, just go to this ismoney.com.
0:32.9	Dot UK or download the app. But first, a deal is a deal. A promise is a promise. Except maybe when
0:41.0	something unexpected, like a global pandemic happens, the government now finds itself with rather
0:47.1	a conundrum on its hands. To be fair, it has a few, but this one relates to the triple lock.
0:53.1	It was introduced in 2010 with the honourable purpose of protecting pensions from inflation
0:57.8	and making sure that they go up every year by a real tangible amount.
1:02.1	So either the rate of inflation, average earnings, or 2.5%, whichever is higher.
1:07.7	What was unforeseen in 2010 was a potential rise of 8% when the country's finances
1:14.2	aren't exactly in the rudest of health. Simon, you wrote about this, but firstly,
1:19.2	though, Tanya, just explain about the triple lock. What was the thinking behind it when it was
1:24.7	first introduced and has it, I don't know how you'd measure this, but has it been a
1:28.0	success? Well, it depends how you look at it. Yes, in some ways, as you said, it was an honourable
1:33.5	attempt to make sure that pensioners got a decent increase in their state pension every year of at least
1:41.0	2.5%. So at least they had some certainty. It's also been a bit of a political
1:46.7	gimmick, it's got to say. It's artificial. And the people who criticize it year after year
1:54.0	and have suggested going to a double lock point out that this this 2.5% is an anomaly. It isn't sustainable in the long run. It's going to
2:03.3	get too expensive eventually. That's obviously different from the current situation. In terms of
	...

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