Is the triple lock sustainable? Pensioners may not get the bumper 8.5% increase they were expecting next year
The Work and Pensions Secretary has admitted to ITV News the government's triple lock pension promise is not sustainable.
It comes as pensioners may not get a bumper 8.5% increase in the state pension next year as ministers try to limit the cost to the taxpayer.
Under the triple lock – which guarantees an increase in line with average earnings, inflation or 2.5%, whichever is highest – pensioners would have been in line for a rise linked to wages from April.
But ministers are considering whether to strip out the impact of public sector bonuses on the earnings figure, which could mean an increase of around 7.8% instead, potentially saving the government hundreds of millions.
Mel Stride said: "In the very, very, long-term, if you have an arrangement like the triple lock that keeps ratcheting up pensions by the highest of three different metrics - it seems to me that it does become unsustainable in the long-term.
"But we're not in the very long-term, we're in today. We have a commitment to it."
When asked if the government should keep the commitment going into the next general election, Mr Stride answered: "That's a very big fiscal decision and it's not one for me to opine on."
The triple lock has had a big effect - since 2010, prices have gone up by 42%, wages have gone up by 40%, but the triple lock means state pensions have gone up by 60%.
Some pensioners could lose out on around £75 a year with a 7.8% rise compared with an 8.5% rise.
Any attempt to tinker with the triple-lock mechanism would be highly controversial, but Mr Stride stressed the need for any increases to take into account “affordability and the position of the economy”.
Estimates on average earnings are produced by the Office for National Statistics (ONS), with the figure for May-July typically used for that element of the triple lock.
The ONS said annual growth in regular pay excluding bonuses was 7.8%, but one-off payments in the NHS and civil service increased the overall average including bonuses to 8.5%.
No final decisions have yet been taken on the application of the triple lock, and the figures from the ONS could still be revised next month.
Prime Minister Rishi Sunak recently declined to say if the policy would feature in his party’s manifesto at the general election expected next year.
And Labour’s deputy leader Angela Rayner refused to commit her party to the policy, telling the BBC: "We will have to see where we are when we get to a general election and we see the finances."
An 8.5% rise in the full new state pension could take it from around £204 per week to £221, or from around £10,600 to around £11,502 annually.
But a smaller rise of 7.8% would instead take it from around £204 per week to around £220, or around £11,427 annually.
A rise in the basic state pension of 8.5% would take it from around £156 per week to just under £170, or from around £8,122 to £8,814 per year.
But a 7.8% rise would mean an increase in the basic state pension to around £168 per week or around £8,756 per year.
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