- Proposals made in the House of Lords to retain the state pension triple-lock have been rejected by the House of Commons
- Last night, MPs voted against amendment to keep the earnings link in 2022/23, with Lords arguing an alternative to July’s 8.3% jump could be used
- The basic state pension is set to increase by £4.25 a week next year, from £137.60 per week to £141.85 per week, while the flat-rate state pension will rise by £5.55 a week, from £179.60 per week to £185.15 per week
- However, with inflation expected to hit 4% retirees’ spending power could drop over the next 12 months
- Unpicking the triple-lock expected to save the Chancellor around £5 billion a year
Tom Selby, head of retirement policy at AJ Bell, (pictured) comments:
“The decision to row back on a clear manifesto commitment that hits pensioners in the pocket will not have been taken lightly by the Chancellor and the Prime Minister, so it is no surprise to see the Government standing firm in the face of opposition from the House of Lords.
“The fact inflation is expected to run hot over the next 12 months has added fuel to the fire, with next year’s planned 3.1% rise in the state pension likely to feel like a real term cut if prices increase by 4% or more.
“The Lords want the Government to retain the earnings element of the triple-lock but explore using an alternative measure that flattens the post-lockdown spike we have seen in 2021.
“Some have argued this could involve stripping out the impact of COVID on wages or using a smoothed earnings measure rather than the figure for the three months to July, when average earnings jumped by an eye-watering 8.3% as the UK economy opened up.
“However, pensions minister Guy Opperman said last night it would not be possible to produce a reliable alternative earnings measure.
“What’s more, even a small extra increase in next year’s planned state pension would leave the Chancellor with a sizeable hole in his spending plans. Every 1 percentage point increase in the state pension adds around £900 million to its cost – money which would likely have to be found from elsewhere.”
