Fears are growing that the triple-locked state pension increase could be threatened after a minister refused to confirm whether the rise in inflation would be respected.
Treasury Chief Secretary Chris Philp declined to confirm to reporter Robert Peston on live television whether state pensions and Universal Credit will increase in line with inflation next year.
The state pension could exceed £10,000 a year if the Government makes good on its promise to reinstate the ‘triple lock’ on annual increases.
This guarantee means that state pensions are increased by the highest value of 2.5 percent, salaries and inflation, although it was abandoned last year because the pandemic temporarily distorted the income figure.
Triple lock under threat: The prime minister had previously pledged to maintain the triple lock this year, but the latest comments bring uncertainty at an already difficult time for retirees.
Inflation is expected to be by far the biggest factor this year, putting retirees in line for a potential raise of 10 percent or more.
Chris Philp told Robert Peston live on ITV: ‘The matter is under consideration. Obviously I’m not going to make political announcements here.
‘It will be considered as normal over the next few weeks. I will not make policy announcements live on television.
The lack of reassurance given by the minister is likely to worry a large number of retirees struggling to cope with the rising cost of living.
Despite the suspension of the triple lockdown last year, during the Conservative leadership campaign Prime Minister Liz Truss promised to reinstate it this year.
However, it may be pressured to change course due to tight public finances.
Helen Morrissey, senior pension and retirement analyst at Hargreaves Lansdown, said: “These comments will cause real concern among retirees who were hoping to get an inflationary boost to their state pension next year under the triple lockdown.
‘Many retirees have been left struggling with their finances as the cost of energy and food has skyrocketed and their income has not been able to keep up.
The triple lock-in was lifted last year because salary data was deemed to have been skewed by the pandemic furlough plan, and instead retirees were given a 3.1 percent raise that was brought in line with inflation. CPI at that time.
“However, since then it has skyrocketed, with many retirees hoping for a big raise starting next April to help them manage.”
Could the Government get rid of the triple lock?
If the triple lockdown were to be abandoned once again, this could increase pressure on the government, which is already facing criticism for its economic policies to date.
There is overwhelming support for the guarantee scheme among retirees, although less so among the younger generations.
Some 55 per cent of adults in general support maintaining triple lockdown in the current circumstances, according to a Canada Life poll weighted to be representative of all UK adults.
But that drops to 78 percent among those 55 and older, 44 percent among 35-54 year-olds and 33 percent among 18-34 year-olds.
People’s Guarantee: State pension on track to rise 10% if new PM Liz Truss upholds triple lock promise
Steve Webb, a partner at LCP, believes that because of his popularity with those over 55, the government may feel it must comply with the triple lockdown or risk alienating core voters.
He said: ‘For a government already struggling at the polls, breaking the state pension triple lock for the second year in a row would be a very high risk strategy and I would be surprised if they didn’t pay a full inflation peg, especially so close to a choice.
However, Webb feels the government may be less inclined to do the same for other benefits like Universal Credit.
* Subject to seasonal adjustments: how the triple-locked state pension was decided over the years.
Webb added: “I think they will feel they can ‘get away’ with a sub-inflationary increase; they’ll say that the increase in cash is still relatively large (perhaps 5-6 percent), and that if that’s what people with jobs are getting, it’s “fair” to pay people in benefits the same.
‘Politically, they will probably feel they have far fewer core voters among working-age people receiving benefits compared to people receiving state pensions.
“If they want to save billions to fund the tax cuts, DWP is the biggest spender, so it seems very likely that they will be asked to contribute savings of billions of pounds.”
What could an inflation-linked raise mean for retirees?
The rate of inflation will be higher this year, so the increase in state pensions must be decided by the September CPI figure, which is due on October 19.
Inflation in August, published last week, was at 9.9 percent, down from 10.1 percent. The latest earnings growth figure, based on full pay including bonuses, was 5.5 percent.
But seniors waiting to find out what state pension increase they’ll get next April might find it’s still under-priced, with inflation still on the rise.
This year, soaring inflation is taking a heavy toll on retirees struggling to pay household bills.
If August’s 9.9 per cent inflation rate were used, retirees on the post-2016 full-rate state pension of £185.15 a week or around £9,600 a year would see a rise to £203.50 per week or £10,600 per year.
Those on the old basic rate would see a jump from £141.85 a week or around £7,400 a year to £155.90 or £8,100 a year.
How much is the state pension?
The basic state pension is currently £141.85 a week, or around £7,400 a year. It is supplemented by additional state pension rights (S2P and Serps) if they are accumulated during the working years.
The two-tier state system was replaced in 2016 by a new “flat rate” state pension. This is currently worth £185.15 per week or around £9,600 per year.
People who have hired S2Ps and Serps over the years and retire after April 2016 get less than the new full state pension.
But they can fill in gaps in unpaid or underpaid National Insurance in previous years, do voluntary top-ups to buy additional qualifying years, and rack up more years if they have enough time between now and state retirement age.
Workers had to have 30 years of Social Security contributions to get the old state pension, but now they must have 35 years of contributions to get the new flat-rate state pension.
But even if you paid in full for 35 years, if you hired for a few years on top of that, you could still reduce what you get.
Everyone has the option to defer their state pension to get more in their later years. You can check your NI record here.
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