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Triple Lock on Pensions Suspended

7th September 2021

The government has confirmed a one-year suspension of the "triple lock" formula for annual state pension increases.

The move follows government concern that a big post-pandemic rise in average earnings would have meant pensions increasing by 8%.

Work and Pensions Secretary Therese Coffey said the average earnings component would be disregarded in the 2022-23 financial year.

Instead, the rise will be the consumer inflation rate or 2.5%.

From the BBC
What is the triple lock and how does it work?
At present, the state pension increases each year in line with the rising cost of living seen in the Consumer Prices Index (CPI) measure of inflation, increasing average wages, or 2.5%, whichever is highest.

This is known as the triple lock, and it is a Conservative manifesto pledge for the five years of this Parliament.

Official forecasts suggest that the increase in average earnings will be the highest of these three, by a considerable margin.

As people come off furlough and return to full pay, this is recorded as a large rise in average earnings. Job losses have also affected those in low-paid work too.

This leads to a unique situation, and one which economists describe as an anomaly.

Predictions by the Bank of England suggest that annual average earnings for the period relevant for the triple lock could go up by 8%, which would normally trigger an equivalent rise in the state pension.

That is considerably higher than rises seen under the triple lock in the past decade.