Rishi Sunak ‘could replace state pension “triple lock” with a temporary “double lock”‘ to avoid paying a £7billion annual bill caused by spiking wage growth during the pandemic
- Rishi Sunak ‘considering temporarily ditching the pensions triple lock pledge’
- Coronavirus crisis means state pension could rise by as much as eight per cent
- That would leave the Government facing extra annual bill of more than £7billion
Rishi Sunak could temporarily replace the Government’s ‘triple lock’ promise with a ‘double lock’ as he tries to avoid adding more than £7billion to the annual cost of the state pension.
The Chancellor is weighing up ditching the pledge for this year only after the coronavirus pandemic skewed wage growth and left the Treasury facing a massive bill.
The ‘triple lock’ commits ministers to increasing the pension by the highest of earnings, inflation or 2.5 per cent.
Mr Sunak is said to be considering removing the wage growth element of the policy, with the increase instead tied to just inflation or 2.5 per cent, according to The Telegraph.
Rishi Sunak could temporarily replace the Government’s ‘triple lock’ promise with a ‘double lock’ as he tries to avoid adding more than £7billion to the annual cost of the state pension
The economic chaos caused by the Covid-19 crisis means wage growth could be as high as eight per cent this year.
That would leave the Government having to find more than £7billion a year to cover the pension increase that should follow.
However, inflation is estimated to hit around three per cent which would result in a significantly lower pension increase price tag of approximately £2.6billion.
Another option reportedly under consideration is to base the increase on a measure of average earnings taken over a two or three year period to even it out.
The prospect of a temporary shift away from the ‘triple lock’ has prompted fears that the move would ultimately end up being made permanent.
Caroline Abrahams, charity director at Age UK, told The Telegraph: ‘It is not surprising that some policymakers are arguing for a different approach on a one-off basis.
‘However, it’s asking a lot for older people to believe that any scaling back of the triple lock would only be temporary rather than permanent.’
A Treasury spokesman said: ‘We recognise the legitimate concerns about potentially artificially inflated earnings numbers impacting pensions uprating.
Economists say the effects of furlough and the pandemic are warping wage growth figures, and average wage increases could reach 8 per cent by the quarter to July – which is used for setting the state pension
‘We will ensure that decisions on pensions are fair for both pensioners and taxpayers.’
It comes after Downing Street last week hinted that the ‘triple lock’ could be watered down due to fears over Covid ‘warping’ wage figures.
A spokesman for the PM said they ‘recognised people’s concerns’ about the prospect of the mechanism resulting in an eight per cent rise – squeezing the public finances even further.
No10 stressed the Government has to ensure ‘fairness for both taxpayers and pensioners’.
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