Inflation has reached a record high of 8.8 percent this fiscal year, due to the economy going from complete ‘lockdown’ to spending-spree eutopia. If Chancellor of the Exchequer Rishi Sunak decides to keep the triple lock policy in place, as the Conservative manifesto promised, pensioners could get an extra £12 per week from April next year.
But the usual guarantee, that state pensions will rise to whichever is the highest out of inflation, the average percentage growth in wages (in Great Britain) and 2.5 percent, is under threat.
Normal state pension inflation totals at about 2.5 percent per year, so an eight percent increase would be a huge chunk out of government money in a period of economic recession.
The triple lock costs the Government approximately £0.9billion for every one percent rise, meaning an eight percent rise would cost about £7.2billion.
Chief Economist for the Trades Union Congress, Kate Bell, argues against breaking the triple lock and thinks that a large rise in the state pension is just what this country needs.
She said the current state pension of £137 per week is not in line with current average wages.
Ms Bell added: “If it catches up just that little bit faster this year, well then I think that will be welcome.”
But professionals in the finance industry think a compromise needs to be achieved in order to offer a substantial rise to pensions, but not one as large as 8.8 percent.
Steven Cameron, pensions director at Aegon, said the government should “smooth out the sharp peaks and troughs we’re seeing in earnings growth and base triple lock increases on experiences over two or more years”.
Sarah Coles, personal finance analyst at Hargreaves Lansdown agreed that there needs to be “an element of smoothing applied to the wage figures”.
She said: “It would mean the spikes are evened out to a more gradual rise, so pensioners keep the incredible value of the triple lock, and the government doesn’t have to scrabble around to try to find billions of pounds in its budget.”
The Office for National Statistics released a more accurate figure of average earnings inflation with the distortions from the pandemic stripped out, which came to an increase of 3.2 – 4.4 percent.
It is thought that Mr Sunak may use this data as a way to keep the triple lock promise intact by offering an inflation rate for pensions that mirrors financial growth, minus the abnormal effects of the pandemic.
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