The Triple Lock is becoming increasingly unsustainable, personal finance experts have warned.
State pensioners warned perk they’ve received for 14 years could be axed
Millions of state pensioners are at risk if the Department for Work and Pensions ( DWP ) decides to bow to pressure and scrap a 14-year-old rule. The Triple Lock is becoming increasingly unsustainable, personal finance experts have warned.
Warning the DWP, Neil Record – a former Bank of England expert – told the Telegraph newspaper over the ballooning state pension bill: “Let’s start with some facts about the state pension.
“The triple lock formula says that the state pension will rise in April of each year by the highest of CPI inflation in September of the previous year, average weekly earnings of May-July of the previous year or 2.5pc.
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“In the 14 years since the triple lock came into full operation (2012-2013), average earnings have risen at a rate of 3.3 per cent per year – but the state pension, benefitting from the triple lock, has risen by 4pc per year.
“This 0.7 percentage point per year uplift may not sound much, but without the triple lock and just relying on average earnings, today’s state pension would be £208.65 per week rather than the current £230.25.
“So pensioners have done better than workers to the tune of 10.3pc over the past 14 years. This feels morally and financially unsustainable. There are more problems with the triple lock.
“Of the 14 years since it took effect, in five of those years the annual uprating has been based on average earnings, five years on CPI, and four on the 2.5 per cent minimum.
“For every one of the five years that average earnings have been used as the uprating index, later revisions mean that the uprating no longer matched the actual earnings increase.”
He says scrap the guarantee and instead link increases before retirement to average wages, then switch to inflation-based rises once retired.