State pension increases moved from the headline retail prices index (RPI) to the Triple Lock of the higher of the consumer prices index (CPI), average wages inflation and 2.5%pa with effect 2012/13.
Much has been said that the move away from RPI to the triple lock has been detrimental to pensioners in addition to recent ‘rumblings’ of removing the triple lock.
In the recent House of Commons Briefing Paper Number CBP-07812 - State Pension Triple Lock, published on 25/06/20, we decided to delve into the figures, see through smokescreens and assess its value.
In the period 2012/13 through to current tax year 2020/21, the compounded effect of RPI increases would have been 29.25% increases to state pension whereas the triple lock actually delivered 31.45% increases. Clearly, the triple lock has been better for pensioners and more expensive for government than the old RPI measure since its introduction.
That said, with Chancellor Rishi Sunak allegedly looking to remove the triple lock, now overruled by Boris Johnson, if CPI had been the measure then over the same period, state pension increases would have been 20.94%, some 10.5% lower than they have been with the triple lock.
It is clear that the costs of both the coronavirus pandemic and Brexit will need to be paid for with reduced spending, reduced borrowing and higher taxes. Changes to the triple lock are an obvious target and with an aging population in the UK, it is almost inevitable that the triple lock will go.
We are expecting a full review of the pensions system, both state, private and company pensions within the next two years and we believe the coming year tax year 2021/22 could see the last triple lock state pension increases.