Pensioners ‘feel the squeeze’ of triple lock suspension in 2022 as inflation soars

Pensions triple lock scrapped for millions of Brits

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2021 was a tumultuous year for the finances of British people, with no one feeling the impact of the COVID-19 pandemic more than pensioners. With a cut-price increase to their state pension coming in 2022, there could be more tough times ahead.

The state pension triple lock policy, a Government guarantee which has been in place for a decade, will be suspended for the upcoming tax year, starting in April 2022.

The goal of the triple lock is to ensure the state pension increases by a minimum level of 2.5 percent each year, giving retirees peace of mind that their weekly income will rise to reflect the cost of living.

While this will still be the case in 2022, pensioners face being denied a potential bumper boost to their state pension which would have been more than three times that amount.

Adrian Lowery, personal finance expert at Bestinvest, laid out the changes made to the triple lock this year.

He explained: “Under the triple lock, the state pension is meant to increase every year by the highest of consumer price inflation, average earnings growth or 2.5 percent.

“But with post-pandemic earnings growth spiking to more than eight percent – and Government coffers stretched – the Chancellor suspended the earnings element for the tax year 2022/23.”

The earnings element was removed as the Government believed the reason it was so unusually high was because of the number of people returning to work from the furlough scheme.

Mr Lowery added: “This means pensions will rise by 3.1 percent, which was the rate of UK consumer prices index inflation in the year to September 2021.”

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An increase of more than eight percent would have comfortably been the largest boost to the state pension since the triple lock policy was brought in.

The announcement of a suspension to the traditional triple lock was made by Thérèse Coffey, Secretary of State for Work and Pensions, in September of 2021, and has been met with opposition from other MPs.

Baroness Ros Altmann led the charge to reinstate an adjusted triple lock policy, suggesting an increase in the five percent range in order to take account of the economic irregularities caused by the pandemic. However, these proposals were rebuffed.

While the Government has assured pensioners this is a purely temporary measure, with the triple lock to be reinstated for the 2023/24 tax year, it could still have a hugely negative impact on Britons’ retirement income in the interim.

Mr Lowery explained: “With inflation having surged ahead of this and predicted by the Bank of England to exceed six percent this year, those reliant on the state pension are going to feel the squeeze.”

The basic state pension is currently £137.60 a week and next April it will rise by £4.25 to £141.85, or around £7,370 a year.

That is topped up by additional state pension entitlements – the now abolished S2P and Serps – if you paid for them during your working years.

The full flat rate for people retiring since 2016 is currently £179.60 a week and will rise in April by £5.55 to £185.15, or around £9,630 a year.

However, the increase to pensioners’ weekly income could have been much more significant had the triple lock been honoured as normal.

With a projected earnings growth figure of 8.3 percent, the full basic state pension could have risen all the way to £149.02, providing an additional £11.42 per week.

Pensioners receiving the full new state pension could have picked up £14.91 more per week, taking their weekly payment to £194.51.

Mr Lowery predicted that the state pension will once again be the topic of much conversation in 2022, as the fight to reinstate the triple lock continues.

He concluded: “With pressure on public finances growing all the time, Government pronouncements at the Budget and elsewhere will be closely watched for their intentions around reinstating the triple lock – or otherwise.”

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