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The Treasury is reportedly considering a one-off change in the way it calculates the triple lock. The rumoured change could see state pensions increased by 7.8% instead of 8.5% in April, should earnings remain higher than inflation.
The Guardian newspaper reported on Tuesday that Treasury officials were thinking about stripping bonuses out of the earnings figure used in the triple lock, to exclude the effect of two NHS and one civil service bonus payments.
The Office for National Statistics said on Tuesday the one-off payments for these large workforces mean the overall bonus figure in the earnings statistics is unusual for the May to July period.
The one-off payments “will account for a large bonus being present in total pay in June 2023 for the health and social industry and the public sector, and in July 2023 for the public administration industry and the public sector. These all show a spike in bonus payments, which has never been seen before.”
The triple lock is in the Conservative manifesto, but Prime Minister Rishi Sunak recently did not confirm that it would be included again for the next election, even though he said it remains government policy and would be unlikely to change before April next year.
A DWP spokesperson said: “The government is committed to the triple lock. As is the usual process, the secretary of state will conduct his statutory annual review of benefits and state pensions in the autumn, using the most recent data available.”
A change in the formula to lower the increase in the state pension could anger pensioners, who are among the largest voting groups. The change would have the biggest impact on the poorest pensioners, who are likely to rely solely on the state pension for their old age income. Those most at risk of poverty in retirement are women, particularly divorced women and single mothers, ethnic minorities, disabled people, carers, multiple jobholders and the self-employed, according to the Pensions Policy Institute.
Recent figures by the Department for Work and Pensions revealed growing pension income disparities. In 2022, more pensioners were in the bottom fifth of society in terms of income than in 2010, while more were also among people with the highest incomes.
The government temporarily changed the triple to a double lock – excluding earnings – after the Covid-19 lockdown, when there was an artificial rise in earnings as people returned to work, which it could potentially point to as a precedent for any change in the formula.
Reports suggest some Conservative MPs are keen for state pension rises to be lower so the government can bring in tax cuts, for which there is little headroom without a reduction in spending. An attempt by the Liz Truss government to cut taxes without specifying how this would be financed led to last autumn’s gilts crisis.
Should the triple lock formula exclude bonus payments next April?