The Government has promised to reinstate the state pension ‘triple lock’, which could boost the State Pension by £733 next year.
The controversial decision to suspend the triple lock to the state pension this year is likely to deprive pensioners of a record £822 increase but promises that it will return have been welcomed.
The triple lock has previously ensured that the amount that the State Pension rises each year is the highest of inflation, wage growth or a set rate of 2.5pc.
It will only increase by 3.1 per cent this year, September’s figure for inflation, rather than wage growth, which has been recorded at 8.1 per cent.
This sudden jump in wage growth is an anomaly, according to the Government, brought on by the disparity in wages caused by furlough and redundancies during the pandemic.
Had the Government stuck to the triple lock, as per its original manifesto, it says it would have been unaffordable at a difficult time for public finances.
The Treasury will be able to save £10 billion in public spending in the 2022-23 tax year thanks to the current suspension of the triple lock.
However, for pensioners, it means that their income from the State Pension will no longer meet inflation, which is expected to rise above eight per cent by the end of the year – meaning pensioners will be £458 poorer in real terms.
An expected 7.6 per cent increase in the state pension next year under a reinstated triple lock would boost the new State Pension by £14.10 per week to £199.25 in April 2023. This equates to an extra £733 a year.
Of course, the promise to reinstate the triple lock is just that, a promise. The Government could still decide to row back on this and set a lower rate of growth, so savers should hope for the best but prepare for the worst.