Pension experts are backing the Government’s rationale to suspend the triple-lock guarantee on the State Pension for this year which would have seen the State Pension increase by 8% from April 2022. Instead, pensioners will see an increase in line with the consumer inflation rate or 2.5% – whichever is higher.
Debate over the practicality and longevity of the formula has been rife even before the COVID19 pandemic with some in the industry calling it outdated and not fit for purpose.
Stuart Price, Partner and Actuary at Quantum Advisory, says: “Criticism of the triple-lock has been prevalent for several years as, by some, it is seen as imbalanced against workers who often don’t see wages increase as much as the State Pension. However, it has ensured that many pensioners remain out of poverty, which was the reason for it being introduced.
“The current situation, however, leaves very little choice for the Government and disregarding the average earnings component for this year, which has been massively distorted by the pandemic, is the best decision they could have made, and a fair one. Those receiving the State Pension will still see an increase in their income, but less than if this lock had been in place.
“It will obviously help alleviate some of the financial pressure being placed on the Government and it could open the door for further debate in putting an end to the guarantee, which was first introduced in 2010. Calls to ditch the guarantee or reduce it to a double-lock have been quashed by the Government in the past for fear of a potential backlash from retired voters. It will be interesting to see what happens next.”
Stuart Price is a Partner at Quantum Advisory, which has offices in London, Amersham, Bristol, Cardiff and Birmingham.
Established in 2000, Quantum Advisory provides pension and employee benefits services to employers, scheme trustees and members.