Triple lock on state pension scrapped – here's how much you will lose...

[dutchman]

Pensioners denied bumper increase next April as ministers opt for much lower level



The Government has broken its “triple lock” promise, denying millions of pensioners a record £822 increase in the state pension.

Thérèse Coffey, secretary of state for work and pensions, has announced a temporary suspension of the long-held Conservative manifesto pledge in a scramble to avoid a £5.4bn increase in the annual pensions bill.

The mechanism, which ensures the state pension rises by the highest of inflation, wage growth or 2.5pc, will no longer be linked to earnings for the 2022 uprating.

The state pension will rise by 2.5pc or inflation next April rather than the 8.8pc increase that was due under the triple lock. A freak jump in wage growth caused by furlough and redundancies during the pandemic made the promise unaffordable at a difficult time for public finances.

However, the Prime Minister has delivered a harsh blow to pensioners, ignoring earnings data published by the Office for National Statistics which suggested the Government use a watered down, more realistic earnings figure of 3.5pc.

If the change stays in place indefinitely, Britons will be more than £14,000 worse off by the time they reach age 85 as a result assuming the state pension rise by 2.5pc a year instead of earnings. They would get an extra £233 increase per year instead of £822. Pensioners have lost out an additional £100 in the Government's decision to opt for the lower rise of 2.5pc over the ONS's 3.5pc.

It is estimated the Treasury will save £5.4bn by dismantling the triple lock and blocking the historic increase.

However, 12.4 million state pensioners will be tens of thousands of pounds worse off. Someone turning 66 this year would be £14,105 out of pocket by age 85.

This is the most conservative calculation as it assumes the state pension only increases 2.5pc beyond 2022. The real loss could be far higher. The £589 difference between the two payments would compound over time, costing pensioners thousands of pounds in retirement benefits.

Sir Steve Webb, former pensions minister and now partner at consultancy LCP, said tampering with the triple lock could “break the spell” and set a precedent for more tinkering in future.

“The great advantage of being a pensions minister with the triple lock is we didn’t have to go to the Treasury with a begging bowl to win an increase each year. The increase shouldn’t be based on what we can afford this year but it could go that way. The first time you tweak it it’s shocking and then it becomes more normal,” Sir Steve said.

[rebbonk]

Normally, I'd say that this has finished the Tories for the next 20 years. Unfortunately, there is no credible opposition, so I think we can expect to be shafted time and time again.

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There are now signs the government is planning to scrap the inflation link too after the Bank of England claimed the current high rate is 'only temporary'.

It wouldn't just just be pensions affected but all benefits and also many wage agreements which are linked to inflation, thus saving the chancellor tens of billions.

[dutchman]

By the time this so-called pension "increase" is paid (in April) inflation will be running closer to 8% than 3%, a net decrease of 5%. And that's just according to official figures, the real increase in the cost of living will be much higher than that.

Sunak had an opportunity to correct that in the budget but chose not to.

[dutchman]

We’ve allowed all of our pensions to be cut



The trick to launching a tax raid is always to make it sound as if it affects someone else.

Freezing higher-rate tax thresholds — that’s the rich. Taxing dividends more heavily — business owners. Scrapping the triple lock on the state pension — that’s just old folk. And, as we all know, they’ve done just fine out of the pandemic.

In reality, though, many of these taxes, and benefits, affect us all eventually, and it is only then that we realise how much we have lost.

The state pension is not only for old people. Whether you are 22 or 62, it is yours. When it rises, all our future pensions increase too. When it doesn’t, we are all poorer.

So we need to stop and ask one more time whether the chancellor’s intention to suspend the triple lock that promised to raise the state pension by whichever is the higher out of wage growth, inflation or 2.5 per cent is justified.

Pensioners are not the wealthy bunch of baby boomers that they are often characterised to be. One in three gets less than £150 a week from the state pension; about 1.2 million get less than £100 a week.

Government analysis shows that the average weekly income of a pensioner has increased little in a decade, from £319 a week in 2010 to £331 a week by the end of 2020 — a rise of 3.76 per cent. Those aged over 75 have an average weekly income of £302.

The state pension is not a handout. You earn it by paying for it and working for more than 30 years. Unquestionably the state pension should not rise by the traditional earnings measure, which is September’s growth in average total pay, including bonuses, published by the Office for National Statistics (ONS).

This came in at 8.3 per cent — an unusually high number because of the distortions of the pandemic.
Inflation was 3.1 per cent, and so the government chose to use this measure instead. Yet that too is distorted.

The move costs us £30 billion over the next five years, and strips £2,660 from someone on the new state pension over the same period.

The chancellor, Rishi Sunak, did not need to scrap the link to earnings altogether.

Section 150A, subsection 8 of the Social Security Administration Act 1992 is the legislation that created the earnings link on pensions — and essentially says you can pick any measure you want.

There is a wealth of data from the ONS and the Office for Budget Responsibility to choose from that could have given a fairer figure of, say, 4 per cent or 5 per cent.

Sunak found plenty of wiggle room in the budget to splash the cash — just not enough for pensioners.

The former pensions minister Baroness Altmann is trying to launch a last-minute bid to prevent the chancellor from hurting those who rely on the state pension.

It was the calculation of earnings that was broken, not the triple lock. Rather than fix the part that needed repairing, the chancellor chose to break a pledge that was actually working.

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Boris Johnson defeated over pensions triple lock as Lords vote to keep 8.3% rise



Boris Johnson has suffered a heavy defeat over his plans to suspend the pensions triple lock amid warnings that millions of older people could be pushed into poverty.

The House of Lords voted by 280 votes to 178, majority 102, to back a cross-party move to keep the link between average earnings and retirement payouts.

It means that MPs will be asked to vote again on whether to back the Prime Minister's £5bn raid on pensioners incomes next year.

Former pensions minister Ros Altmann, who led the push, said: "Most pensioners are not well off and will struggle to cope with the price rises the Government knows are coming down the track.

"We know that heating and food costs are going to rise, yet we are going to see a squeeze in the state pension, which is already very low.

"We already have two million pensioners in poverty and we know that pensioner poverty is on the rise again.’

The new amendment would restore the link with earnings but would allow the Chancellor more discretion to adjust the pension rise to account for distortions caused by the pandemic.

Dennis Reid of campaign group Silver Voices said: "This is a life-or-death matter for millions of senior citizens who survive on the meagre state pension alone, and who are in desperate straits because of the surge in energy and fuel prices."

[dutchman]

I've not seen this mentioned anywhere but older pensioners have been short-changed twice over. That's because last time around they received the same increase in cash terms as those on the higher "new state pension" whereas this time they will only get the same percentage increase. As their pensions are lower to begin with it means the cash increase they receive will also be lower.

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Is the state pension triple lock doomed?



Elderly people will face hardship after a last stand to save the state pension triple lock foundered, politicians and financial experts have warned.

Fears have been raised that the popular pensioner guarantee could be tweaked or even scrapped for good in future, after Tory MPs voted for a one-year suspension.

Their overturning of a rebel House of Lords amendment means the state pension will rise by 3.1 per cent next April, lagging inflation which is already thought to be running at 4 per cent.

'The Government refused to budge on its decision to scrap the earnings element of the state pension triple lock,' says Becky O’Connor, head of pensions and savings at Interactive Investor.

'It’s disappointing for pensioners that the Treasury could not find an alternative that would better protect pensioner incomes against inflation than the measure being used this year.

'This now looks to be on the low side given sharply rising energy, food and fuel bills. There is a real risk that some pensioners will struggle to stay warm and well fed this winter.'

O’Connor warns: 'The longer-term threat is that the door is now open for the state pension triple lock to be scrapped for good. This is worrying.

'The Government says it will reinstate the triple lock after a year - but a lot can happen in a year and the risk is that the Government will renege on this promise.

'For future generations of workers, who might one day depend on the state pension for the bulk of their retirement income, the chipping away of the triple lock is concerning.'

[rebbonk]

I'm sensing a definite turn against Bozo and his government, possibly due to recent events involving what most of us would see as corruption. Unfortunately, there is no credible opposition; so even if the fat womble is ousted, we're still likely to get more of the same.

[dutchman]

Pension triple lock 'must be reinstated' to protect from the ravages of inflation



The Government is under pressure to U-turn on its controversial decision to suspend the state pension “triple lock”, as soaring inflation eats away at pensioner incomes.

Inflation has surged to its highest level in a decade at 5.1pc but the state pension will rise by only 3.1pc next April, September’s inflation figure.

More than 12 million pensioners will be hundreds of pounds worse off, as incomes fail to keep pace. In total, £187 will be wiped off all British pensioners’ yearly income if inflation remains at its current level, amounting to nearly £5,000 by the time they reach age 85.

Pressure has been mounting to reverse the break on the triple lock, which ensures the state pension rises by the highest of inflation, earnings growth or 2.5pc. More than 60pc of Northern MPs have criticised the decision to break the Conservative party manifesto pledge, according to a YouGov poll seen by The Telegraph.

Helen Morrissey, of stockbroker Hargreaves Lansdown, said many pensioners would struggle to meet mounting bills next year when the state pension rises by £5.55 a week. This falls nearly £4 a week short of the £9.15 increase needed to maintain spending power, she said.

She said: “If a pensioner is reliant on the state pension they will find their money will not go anywhere near as far as it did in the coming months. Pensioners tend to spend a larger proportion of their income on things like gas, electricity and food and these have all increased by far larger amounts than inflation so many people will struggle.”

Baroness Ros Altmann, a former Conservative pensions minister, who led a campaign in the House of Lords last month to defend pensioner incomes, said the Government had ignored the warning signs and betrayed pensioners.

“We all knew that higher inflation was coming and that 3.1pc was too low of an increase. But the Government wouldn’t listen. Pensioners have really been short changed and are facing a terrible time ahead,” she said.

Sir Steve Webb, a former Liberal Democrat pensions minister, said state pension income would fall in real terms and income from private pensions would also be squeezed.

The Government will have to rethink its decision and there is still time to reverse the suspension, Sir Steve, who is now a partner at consultancy LCP, said. “The Government has shown that it can change Universal Credit rates at short notice when it wants to, and it will now come under pressure to re-think the modest state pension increase it had planned,” he added.