Triple lock annuity: what is it and what happened to it

An elderly couple looks at their finances.

The government has ditched an election promise on pensions (Image: Getty Images)

ex-chancellor Rishi Sunak’s budget included a whole host of changes that will affect everyone’s wallet – with some areas of the economy benefiting but others losing out.

And since then there has been more bad news as the Bank of England revealed the UK is already in recession, GDP is falling and interest rates are at their highest levels in over a decade.

Interest rates were raised from 1.75% to 2.25% – the highest level since November 2008.

Some things have changed with this week’s mini-budget presented by the new Chancellor of the Exchequer, Kwasi Kwarteng

It involved massive changes in parts of the UK economy, including an energy price guarantee capping bills for the average household at £2,500, saving households an average of £1,000 a year.

One thing that hasn’t been addressed, however, and has already changed in June, was the suspension of the “triple lock” format for state pensions.

But what actually is the triple lock pension and what happened to it?

What is the triple lock pension?

The triple lock is a pledge that state pensions would increase by the largest of three numbers – annual inflation, average earnings increases, or 2.5%.

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With that in mind, annuitants could have expected an 8% increase in their weekly payments over the next year – particularly useful in times of pandemic uncertainty.

However, former Works and Pensions Minister Therese Coffey announced earlier this year that the government would not go through with the proposal and would decide on pensions based on annual inflation, or 2.5%.

Why was the triple lock pension abolished?

Although the concept of a triple-lock pension was part of the Conservatives’ manifesto, the decision to disregard annual income was made to prevent those expecting a pension from “unfairly benefiting from a statistical anomaly”.

Annual wages rose last year after millions of people experienced a 20% drop in wages while on vacation.

However, Coffey went on to say that the triple lock will return as usual in 2022: “We can and will apply the triple lock as usual for the remainder of this Parliament from next year, in line with our manifesto commitment.”

Financial auditor analyzes company financial report concept for bookkeeping, bookkeeping and tax form

The triple lock pension is set to return next year – but some are skeptical about its long-term future (Image: Getty Images)

What is the current state pension worth?

The full current flat rate State Pension (for those who reached state pension age after April 2016) is £179.60 per week.

The basic full old state pension (for those who reached state pension age before April 2016) is £137.60 per week.

From April 2022 this will rise by 3.1% in line with inflation – meaning beneficiaries of the new flat-rate pension will get £185.15 a week.

The basic state pension will rise to £141.85.

Does the triple lock stay in place when it comes back?

Although the government has said the deal will return in due course, some are skeptical it will be an arrangement that can continue in the long term.

The announcement is divided (Picture: Getty Images)

James Andrews, Senior Personal Finance Editor has predicted that despite the promises made, “more changes” are on the way: “It’s quite simply mathematically impossible to keep the triple lockdown indefinitely with promises that guaranteed pensions will cost the government ever more year regardless of what happens to the incoming taxes.

“A one-year ban may cover a statistical anomaly, but it doesn’t help answer the larger question.”

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Justin Scacco

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