A “lucky” generation of pensioners will benefit from an 8.5 per cent rise in their pensions today.
Under the triple lock, pensions rise every year in line with whichever is highest out of earnings growth, inflation or 2.5 per cent.
Pensions will rise today by 8.5 per cent — in line with earnings growth — after last year’s increase of 10.1 per cent in line with high inflation at the time. Inflation is currently at 3.8 per cent.
Both Labour and the Conservatives look set to keep the pensions triple lock despite warnings from experts that the policy creates uncertainty in the rest of the public finances.
As Britain’s population ages, the Institute for Fiscal Studies think tank has concluded the triple lock could easily cost anywhere between an additional £5 billion and £40 billion per year in 2050 in today’s terms. There are expected to be 25 per cent more pensioners in 2050 than today.
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Paul Johnson, the director of the IFS, said the effect of the triple lock was “random”. He said; “It could have a big effect, it could have no effect at all. It’s such a difficult policy to keep going because it creates so much uncertainty for the public finances.”
Johnson said a “lucky” generation of pensioners had benefited from a combination of state pensions, occupational pensions and an “amazing” increase in house wealth.
But he said the freezing of the personal allowance threshold had also squeezed pensioners’ incomes. The personal allowance — the amount you can earn tax-free — will remain at £12,570 until 2028.
Analysis by the Liberal Democrats has found that three quarters of today’s rise will be wiped out by stealth taxes.
Due to the personal allowance being frozen, there will be between 1.4 and 1.6 million more income taxpayers aged 66 years and over in 2027-28, according to the analysis based on House of Commons Library data.
Wendy Chamberlain, the Lib Dem works and pensions spokeswoman, accused the government of driving pensioners into “financial hardship”.
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She said: “Jeremy Hunt has taken a bolt cutter to the triple lock. This Conservative government is picking pensioners’ pockets to try and fill the black hole caused by their disastrous economic policy.
But Mel Stride, the work and pensions secretary, said the 8.5 per cent rise would make a “meaningful difference”. He said: “Thanks to the triple lock and our efforts to drive down inflation, we are putting money back in the pockets of pensioners. This is only possible because we have stuck to our plan and our economy has turned a corner.”
Stride has delayed a decision about when to raise the state pension age to 68 until after the election.
The state pension age is 66, but will gradually rise to 67 in stages between 2026 and 2028.
A government review recommended that the state pension age rise to 68 in the late 2030s, much earlier than the current plans for a phased introduction between 2044 and 2046.
