(Image from Unbiased).
The state pension within the UK is likely to rise by 8.5% in April 2024 after data for what has been dubbed the ‘triple lock’ was published. This policy means that the state pension will increase either based on: the highest of average earnings, inflation, or 2.5% (BBC, 2023).
What is ‘Triple Lock’ and How Does This Affect State Pensions?
Under the new triple lock system, the state pension increases each April in line with whichever of these three measures is highest: inflation, the average increase in wages across the UK, or 2.5%. The triple lock was introduced back in 2010 under the Conservative-Liberal Democrat coalition government and was designed to ensure the value of the state pension was not overtaken by the increase in the cost of living, or the working population’s income. It was temporarily suspended during the COVID pandemic, but it has since been restored.
The state pension is a payment made every four weeks by the government to people who have reached the qualifying age and have paid enough National Insurance contributions. Currently, the state pension age is 66, but for people born after April 5, 1950, the state pension age will increase to 67 for those born on or after April 5, 1960, and then to 68 between 2044 and 2046 for those born on or after April 5, 1977.
Back in April 2023, the state pension went up by 10.1%, in line with the previous September’s measure of inflation.
Since then, it has been worth: £203.85 a week for the full, new flat-rate state pension (for those who reached state pension age after April 2016) and £156.20 a week for the full, old basic state pension (for those who reached state pension age before April 2016) (Independent, 2023).
However, under the triple lock, from April 2024, these numbers will change to £221.20 a week for the full, new flat-rate state pension, and £169.50 a week for the full, old basic state pension (Independent, 2023).
At a cost of £106 billion, the state pension accounts for just under half the total amount the government spends on benefits (BBC, 2023).
The Latest Report on ‘Triple Lock’
The earnings (which are total pay and include bonuses) that the new state pension is based on were recorded at 8.5%, and the inflation figure is unlikely to be any higher. This will likely lead to the state pension increase of 8.5% as discussed, which would be a weekly increase of £13.30 (BBC, 2023). This will lead to an annual increase of £691.60 on the basic state pension – taking the total for the year to £8,814 (BBC, 2023).
This increase is slightly different for those who will reach state pension age after April 2016, as the rise is set to be £17.35 a week, or £902.20 a year – taking the total for the year to £11,502 (BBC, 2023).
This is set to be the second significant increase in the state pension in two years, after a 10.1% increase in April of this year.
The Institute for Fiscal Studies said in a recent report that the lock’s annual cost for the Treasury could reach anywhere between an additional £5 to £45 billion a year by 2050 due to the uncertainty created by the terms of the policy. Moreover, the impact of the current cost of living crisis on working-age people, who are also dealing with rent hikes and rising mortgage rates, will be most affected by these changes as they will be paying the taxes that go into these pension costs. Labour has also refused to give a guarantee that it will be able to stick with the triple lock policy if they win the next election in 2026 (Sky News, 2023).
Number 10’s Commitment to the Policy
Despite these criticisms and the affect the increased state pension will have on the UK during a cost of living crisis, Number 10 stated on September 12 that it was sticking with the policy and refused to indicate how much the state pension will rise ahead of the “formal process” for uprating (Sky News, 2023).
The prime minister’s official spokesman stated: “You know there’s a formal process for this when it comes to uprating but we remain committed to the triple lock which has seen 200,000 pensioners lifted out of absolute poverty after housing costs are taken into account” (Sky News, 2023).
After being asked whether the average earnings figure of 8.5% (including bonuses) would be applied rather than a figure excluding bonuses, the official replied: “All those decisions on uprating are taken on a later date, later this year. I can’t pre-empt that work” (Sky News, 2023). Moreover, the spokesperson also stated that the government would ensure the state pension “remains sustainable and fair across generations'' (Sky News, 2023).
The Divided Opinions of ‘Triple Lock’ From the Conservatives and the Labour Party
Considering the Conservatives have issued their commitment to keeping the pledge after the next general election, as previously stated, Labour has so far refused to offer the same guarantee.
Shadow environment secretary Steve Reed said it was “very important that older people are able to live with decency and respect under all circumstances. [But] we need to see where we are by the time of the next election. It was pretty much a year ago to the month when the Conservative government launched that disastrous mini-budget that crashed the economy and caused prices in the shops to rock and interest rates to escalate beyond levels that people have seen for a decade. I can’t stand here and tell you what the Tories are going to do over the next year. So, we will need to look at where we are come the election. But, it will be in our next manifesto” (Sky News, 2023).
While Chancellor Jeremy Hunt has stated, “Wage growth remains high, partly reflecting one-off payments to public sector workers, but for real wages to grow sustainably we must stick to our plan to halve inflation”, Labour’s deputy leader Angela Rayner said the UK had experienced “13 years of economic failure by the Conservatives, and people can see that their cost of living has increased”, with people still “finding it to incredibly difficult” to cover the costs of living with bills continuing to increase (Sky News, 2023).
Former Conservative leader William Hague has also advocated for the end of the triple lock on pensions, describing it as a “runaway train” that is creating a dangerous social and political situation by denying younger generations a fair stake in the economy (The Guardian, 2023). There have been reports that figures in the government are mulling over making changes to the lock, but it is yet to be known what these changes could be and how this may affect the general election in 2025 (The Guardian, 2023).
Edited by: Shahnawaz Chodhry
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