Pensions triple lock scrapped for millions of Brits
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It means the average earnings growth element of the state pension triple lock will be ignored for 2021/22, leaving the UK’s pensioners with a smaller increase than they were expecting under the Government guarantee. But now they know exactly how much they have missed out on, as new data has shown the latest average earnings growth figures – with the September figure being used in the triple lock.
For the three months to July, average earnings grew by 8.3 percent.
That is slightly down on the 8.8 percent increase that the UK saw for the three months to June, which represented an all-time high, but still would have provided a huge state pension boost for retirees.
Instead of the triple lock, it will now essentially be a ‘double lock’ for next year, with state pension increasing by the higher of inflation or 2.5 percent.
Ian Browne, pensions expert at Quilter, commented on the new figures:
“Last week we saw the pensions triple lock promise broken and the average wage increase element of the scheme scrapped for this year. Data released today by the Office for National Statistics will likely be a source of grief for pensioners as the increase they could have received is made clear.
“This morning’s data reveals earnings growth continues to remain at unusually elevated levels as a result of the unwinding of the furlough scheme and the economic re-opening. Had the average earnings data been taken into account, pensioners would have gained an additional 8.3 percent on their pension this year.
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“While many will be unhappy having now received confirmation of what they could have had, the data only really serves to prove that a one off scrapping of the average earnings element was the right thing to do. Had the triple lock not been amended, billions would have been spent on the pension increase during an already difficult year for public spending.
“Ultimately, the increase in average earnings was artificial and would have provided an unfair boost. We have seen the triple lock be tweaked previously to ensure that pensioners received a fair deal. The government introduced new legislation last year to ensure state pensions were uprated by 2.5 percent in recognition of their manifesto promise and commitment to pensioners – at a time when inflation was a mere 0.5 percent and earnings were falling due to the furlough scheme. While for some it will be a difficult pill to swallow, it is only right that the government reacted now it has gone the other way.”
Between January 2020 and June 2020, average earnings growth fell from 2.9 percent to minus 1.3 percent. There has since been a massive rebound, with last month’s figure representing the highest ever average earnings growth for a three month period.
Helen Morrisey also had her say on the new data:
“It will be a bitter disappointment for many pensioners not to benefit from this morning’s bumper increase which would have put an extra £14.90 per week into their pockets if they were on the new state pension and £11.42 for those on the basic state pension. However, it is well known earnings data has been distorted by the effect of furlough and to award such increases at a time when the working population is struggling with the fall out of the pandemic would not have been popular.
The data stripped out some of the distorting effects of the pandemic, but even doing this would have left the door open for rises of somewhere between 3.6% and 5.1% – again an increase towards the upper end of this scale may have been as unfair. We will wait to see what the future holds for the triple lock after this year’s suspension and await next month’s inflation figures to see what next year’s increase is likely to be.”
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