Chancellor of the Exchequer Rishi Sunak is said to be preparing to break the Conservative Party’s triple lock state pension pledge, amid Treasury fears that the policy may become unaffordable in the aftermath of the coronavirus crisis. According to the Financial Times, Mr Sunak has been warned that the value of the state pension could rise sharply, unless he breaks the pledge next year.
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Number 10 and the Treasury said in a joint statement: “Announcements on tax and pensions policy are for Budgets.
“The government is committed to supporting pensioners.”
Currently, the UK state pension rises each year under the triple lock mechanism.
This means the payment rises in April by whichever is higher out of wages, inflation, or 2.5 percent.
Earlier this year, the state pension increased by 3.9 percent – with this rise being tied to wage growth.
The reports follow a warning issued by former pensions minister and partner at LCP Sir Steve Webb with regards to the future of the mechanism.
According to pension consultants LCP, a slump in inflation could pave the way for the abolition of the state pension triple lock.
Modelling by the firm has prompted the suggestion that unless there is a strong recovery in the economy, CPI inflation could be negative in September, and could even fall below -2 percent.
Following the findings, LCP suggested that falling prices could mean the government finds it easier to justify not increasing the state pension by the 2.5 percent aspect of the triple lock policy.
Commenting, Sir Steve said: “The 2017 Conservative manifesto floated watering down the triple lock, and there can be little doubt that the Treasury would like to see this commitment go.
“From the government’s point of view, a period of negative inflation when prices are actually falling would be the ideal time to justify not sticking to the 2.5 percent floor implied by the triple lock.
“Once the rule had been broken once, it would be more likely to be abolished for future upratings.”
The triple lock mechanism is something Prime Minister Boris Johnson was asked about last month.
It came during his appearance in front of the Commons Liaison Committee, when the Prime Minister was asked about the 2019 Conservative Party manifesto.
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Conservative Party MP Mel Stride asked Mr Johnson if he would honour manifesto commitments, with specific regard to the triple lock mechanism.
Mr Johnson responded: “We are going to meet all of our manifesto commitments, unless I specifically tell you otherwise.
“It’s an important point, and we won’t be blown off. Of course, we are on track to delivering these things.
“We will deliver 40 new hospitals, we are well on track to delivering 20,000 more police officers, and we will recruit 50,000 more nurses.
“Heaven knows the need for those have never been more apparent.
“We are going to get on with our programme, and we have a fantastic agenda for this country for uniting and levelling up.”
Commenting on the reports, Andrew Tully, Technical Director, Canada Life, said: “A change to the triple lock would adversely affect many pensioners.
“However, as the costs of helping the economy deal with the impact of Covid-19 spiral, the Government will need to look at various measures to cut spending and increase taxes.
“It’s unclear at this stage if Rishi Sunak is proposing a long-term change to the triple lock, or simply a change for the next year or two, due to the fact the calculation basis for the earnings part of the triple lock could result in a significant increase.
“If it is a longer-term change, a move to a double lock of inflation, or earnings growth, would safeguard pensioners to a significant degree and mean state pensions won’t fall behind the cost of living or increases in average earnings.
“However, the savings for Government in moving to a double lock are modest compared to a more fundamental change.
“The most important thing we can all do is take control of our own financial futures, as there are no cast iron guarantees that the state pension will be around in its current form to provide a safety net when we retire.”
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