Due to the COVID-19 pandemic, wages are rising at a rapid rate. Under the current triple lock on pensions, this would mean pensions would rise significantly as well. This has left Rishi Sunak in a tricky dilemma, as he wants to maintain the Conservative promise of the triple lock, but with around 12 million pensioners looking to benefit, the Treasury would be under heavy pressure to fund the rise should the triple lock remain unchanged. The question now is whether Rishi Sunak will choose to keep the triple lock, or scrap it.
“The triple lock existed as a Conservative pledge that assured pensions would rise by the highest of either Inflation, Wage Growth, or 2.5%.”
Prime Minister Boris Johnson and Chancellor of the Exchequer Rishi Sunak recently sent an open letter to the heads of the UK’s £2.6 trillion pension corporations. The pair argue in their letter that welfare plans are passing up potential returns because only one-fifth of UK assets are recorded securities. In the meantime, over 80% of pension plans consist of public market investments. Both of them advocate for a “change in institutional financial backers’ outlook and conduct”.
“They urged UK investors to support UK success stories and ensure higher returns and better pensions”. According to the most recent data from the Office for National Statistics, the triple lock could rise by more than 8% in April 2022, putting additional strain on the Treasury and chancellor Rishi Sunak.
The Consumer Price list from September 2021, which will be distributed in October, will be utilized to calculate inflation for next April’s increment. The income figure will be determined by looking at a normal week-by-week profit (possibly including or barring rewards) in the three months to July 2021 to a similar period the earlier year.
“If the state pension were to expand by the most recent earnings figure of 8.8 percent, it could cost the public authority up to £8 billion, a larger number than if pensions were to follow inflation.”
Thanks to the triple lock, pensions increased for 2021/22 by 2.5%, in spite of COVID-19. Currently, a new policy on state pension gets £179.60 per week, an increment of £4.40 from 2020/21 at the pace of £175.20. This adds about an extra £17.60 every month and £228.80 for the money-related year 2021/22. Anyone getting the ‘previous’ basic State Pension by and by gets £137.60 every week, a £3.35 increase over the 2020/21 rate. This adds about an extra £13.40 every month and £174.20 for the monetary year 2021/22. With the prospect of 2022/23 potentially having pensions rise by 8%, everyone on the state pension will certainly be happy.
The new policy on the state pension applies even if you move abroad, as long as it is to the EU, EEA, or Switzerland.
References
Bentley, D. (n.d.). State Pension rule changes announced by DWP taking effect from 2022. Retrieved from Leicestershire news: https://www.leicestermercury.co.uk/news/local-news/state-pension-rule-changes-announced-5789635
Coombe, C. (n.d.). Triple lock placed in doubt as Britons want it scrapped – are payment increases over? Retrieved from express.co.uk: https://www.express.co.uk/finance/personalfinance/1477456/state-pension-triple-lock-uk-scrap-support
Ellis, T. (n.d.). Triple lock ‘a ticking time bomb’ for Rishi Sunak. Retrieved from Professional Pensions:https://www.professionalpensions.com/news/4036003/triple-lock-%E2%80%98-ticking-bomb%E2%80%99-rishi-sunak
Forrest, A. (n.d.). Pensions are set to soar through the £10,000 a year mark unless Rishi Sunak suspends ‘triple lock. Retrieved from Independent: https://www.independent.co.uk/news/uk/politics/rishi-sunak-pensions-triple-lock-b1903976.html
Gilbert, M. (n.d.). I Don’t Want My Pension Funding Sunak’s Big Bang. Retrieved from Bloomberg: https://www.bloomberg.com/opinion/articles/2021-08-16/forget-it-rishi-sunak-raiding-pension-funds-is-not-the-way-to-rebuild-the-u-k#xj4y7vzkg
