The Government has issued its verdict on the State Pension triple lock, a policy which guarantees a rise in the amount people receive every year. The triple lock ensures the rate of the State Pension rises in line with whichever is highest out of inflation, wage growth or a rate of 2.5%.
Andy Burnham recently confirmed there were no plans to abandon the policy. Burnham has acknowledged questions surrounding the triple lock but has said it would be "dangerous" to go against the Labour manifesto, reports Manchester Evening News.
How the triple lock works
The triple lock applies to most State Pension payments. The increase will match the highest of these three percentages:
- how much general living costs have risen by (inflation), based on the previous September's Consumer Price Index (CPI)
- the average wage increase from May to July of the previous year, or
- 2.5%.
The triple lock system can often result in costly above-inflation increases. The rise to the state pension earlier this year was based on wages. The full state pension is on course to climb by over £500 next year.
Cost and calls for change
The triple lock is enormously expensive for the nation as increases are secured annually, as the name implies. Even if the amount surges in one particular year, it would still be required to rise again the following year.
It essentially leaves any government held hostage to pension increases. Calls are growing ever louder for the triple lock to be scrapped, but any decision to do so would represent a bold political move.
Leading economists maintain it will ultimately fall to a Prime Minister to make the defining decision. The Organisation for Economic Cooperation and Development (OECD) is among influential bodies to call for a rule change.
Mark Pemberthy, benefits consulting leader at Gallagher, said: "Andy Burnham has declared he has a plan, but we may need to wait a while before we know exactly what that means for pensions.
Angeline Ong, senior investments analyst at IG, said: "The OECD has added its voice to a growing chorus questioning the long-term sustainability of the triple lock, but politics remains the biggest obstacle to reform."
Current State Pension amounts
The State Pension is currently worth up to £241.30 a week for most. It is usually paid every 4 weeks. You can check GOV.UK to find out the earliest you can claim it.
How much you'll get depends on your National Insurance record. To qualify for the full £241.30, you'll usually need at least 35 years of credits or contributions, and at least 10 years to get anything. If you reached State Pension age before April 6, 2016, the full amount of basic State Pension is £184.90.
