On Monday April 6, state pensioners will get an inflation-busting annual income boost, thanks to the triple lock. Under the mechanism, the state pension rises each year in line with either earnings, inflation or 2.5%, whichever is highest. This year, it will rise by earnings, based on wage growth between last July and September, which stood at 4.8%. Kate Smith, head of pensions at Aegon, said this is a real boost for pensioners. “It represents the fourth-highest jump since the triple lock was introduced in 2011.”
Today, we learned that inflation held steady at 3% in February and Smith added: “State pensioners may be pleased to see their increase outpace living costs, helping their income go a little further in real terms.” The full new State Pension, paid to those retiring after April 6, 2016, will increase by £574.60 to £12,547.60 a year. The full old basic State Pension will rise by £439.40 to £9,614.80. While lower, many basic state pensioners receive the state earnings-related pension scheme (Serps) or state second pension (S2P) on top.
Serps and S2P are not covered by the triple lock. Instead, they rise with consumer price inflation each year and will increase by 3.8%, based on last September’s figure. This further confirms the importance of the triple lock in maintaining pensioner incomes since launch in 2011. But there’s a cloud on the horizon, in the shape of the Iran war.
At the start of the year, the Bank of England was expecting inflation to fall to as low as 2% by the spring. This would have made the 4.8% triple lock increase even more of a leap. Yet the Middle East conflict has upended that. Rob Morgan, chief investment analyst at Charles Stanley, warned today: “Households now face a renewed inflationary tide as oil and gas prices spike.”
We’re already feeling the squeeze at the petrol pumps, but from July energy bills could rise by as much as £332 a year. “As a large net importer of energy, the UK is acutely exposed to global wholesale price rises,” Morgan said. Rising transport and fertiliser costs will also push up food prices, pushing inflation towards 4%, he added.
That will squeeze pensioner budgets, because they spend a higher proportion of their income on essentials like food and energy. And chancellor Rachel Reeves cannot afford an energy bailout, as she’s already blown the national budget. But this is where the triple lock will come to the rescue of pensioners. Yet again.
Wage growth is likely to slow this year, as unemployment rockets thanks to Reeves’s destructive tax grabs. It looks like next year’s triple lock increase will be based on inflation as a result, using this September’s figure. So pensioners could be looking at a 4% increase next year too. That would lift the new full state pension to a new high of £13,050.
It’s impossible to overstate just how important the triple lock is to pensioners. But it also has enemies in Westminster, who claim it is unaffordable. Recently, Labour’s pensions minister hinted that it may not survive this Parliament. The Daily Express is a huge supporter of the triple lock. This latest evidence of how it helps our readers only redoubles our determination to defend it from Treasury attacks.