State pension: Triple lock is ‘out of step with reality’ – rising costs cast doubt on future hikes
STATE pension payments could get a big boost next year, according to new research, with average earnings expected to grow by as much as 8%. State retirees might see their benefits grow to roughly £194 per week in 2022 as a result of the triple lock, but critics have warned that the program’s long-term viability may be jeopardized.
Under triple lock laws, state pension payouts are guaranteed to increase every year by the highest of 2.5 percent, inflation rates, or averaged earnings. As the coronavirus distorts economic output, this dynamic could become a costly problem for the government in the future. Earnings rates are expected to increase in the following months.
The Office for Budget Responsibility (OBR) recently published its latest fiscal risks assessment for July 2021, and among its conclusions was a discussion of how high state pension payments could increase in the future.
“Whence exceptional pandemic-related swings in earnings growth have seen it climb to 5.6 percent in the three months to April 2021, from where it is almost guaranteed to rise further in the three months before the uprating is calculated,” the triple lock was explained.
“The triple lock increases spending by £0.9 billion for every 1% increase in inflation, and our March prediction envisaged a 4.6 percent increase next year.
“So, if earnings growth in the three months leading up to July, which determines triple lock uprating for next April, was 8%, as some predict, that would add about £3 billion to spending each year.”
The potential of an 8% boost in state pension payouts will be welcome news to pensioners, but many have warned that the increase will be costly to the government and, by extension, British taxpayers.
Even in normal economic times, some experts have cautioned that the triple lock is too expensive, and today Rebecca O’Connor, Head of Pensions and Savings at interactive investor, commented on what might need to alter to maintain sustainability.
“Eight percent would be high and out of whack with reality,” Ms O’Connor said, explaining why there were requests to smooth out aberrant data like post-pandemic pay increases, which wasn’t genuine wage growth at all.
“Making adjustments to correct irregularities is a more rational approach than continuing efforts to eliminate a part of the pension system that we should be proud of.
Brinkwire Summary News: “The triple lock is.”