Rishi Sunak has told the BBC that any decision on state pension increases would be based on fairness for taxpayers, as the Chancellor appeared to indicate ruling out the predicted 8% rise in the state pension next year.
Official forecasts suggesting the link with earnings growth could mean a big rise in the amount paid from April 2022.
An overhaul of the rules has been welcomed by various commentators except for groups representing older people and are asking that the government’s promises to pensioners should remain.
On BBC Radio 4s Today programme the chancellor said: “The triple lock is government policy, but I recognise people’s concerns about what that might mean, given the numbers being put around”.
“We will have fairness in mind for both pensioners and taxpayers with our decision process as there are some questions around the earnings numbers”.
The triple lock is the rise in pensions each year and was a Conservative manifesto promise until at least 2024.
It means the state pension increases in line with the rising cost of living as seen in the Consumer Prices Index (CPI) measure of inflation, increasing average wages or 2.5% whichever is the highest.
The average earnings could go up by 8% as predicted by the Bank of England, hence the equivalent rise in the state pension.
According to the government’s official forecaster, the Office for Budget Responsibility and would cost the Treasury £3 billion which is more than previously anticipated.
The sharp rise in earnings is an anomaly created in part by calculations being affected by people coming off furlough, as many economists have pointed out.
The Chancellor has no reason in law why he cannot change the way earnings are judged in the triple lock system and is certainly under pressure to do some from some quarters.
President of the Resolution Foundation, Lord David Willetts, a think tank focusing on people on lower incomes said, “The triple lock should be replaced with smoothed earnings link this autumn as the Covid crisis has impaired the triple lock after the severe job crisis last year contributed to an unnecessary and unjustified 8% rise in the state pension next year”.
“The state pension rise then would be in line with living standards of working age people and the change would be fair to all generations”.
Even with a significant rise, it will be one of the least generous state pensions in Europe.
As Baroness Ros Altmann former pensions minister pointed out, many people only have the state pension as their only retirement income.
“Millions of pensioners especially women only have their state pension to reply on as they did not have the opportunity to build up private pensions when they were younger”.
“Rather than a short-term change in the rules I have called for a wholesale review of pensioners benefits”.
Considerations to “fairness” should also include the wide range of life expectancy in different parts of the country, different rules to determine the rise in Pension Credit – s state pension top-up and the expectations of younger people about their eventual state pension entitlement.
We disagree with Baroness Altman. It is almost inevitable that the state pension triple lock will go. We all have to pull together and tax paying pensioners along with working tax payers will be 'footing' the covid-19 bill. Pensioners that have state pension income only or total income below the personal allowance will pay no taxes so a smaller increase in state pensions is perhaps a fairer way to distribute covid-19 debt costs.