Interactive Investor

Millions offered hope that state pension could continue to rise by earnings

3rd November 2021 09:01

Rebecca O'Connor from interactive investor

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Our head of pensions and savings comments on a vote at the House of Lords.

The House of Lords yesterday voted to retain the triple-lock protection of the state pension, as it backed an amendment to a bill that would continue the earnings link to annual rises in the state pension.

Becky O’Connor, Head of Pensions and Savings, interactive investor“Millions of people who depend on the state pension have been offered a faint glimmer of hope this week that their income will continue to adequately cover rising living costs, as the House of Lords backed an amendment to use an alternative earnings figure rather than ditch the earnings element of the triple-lock guarantee completely.

“But the result of the vote will depend on whether it is backed by the House of Commons and if the government can agree on a fair level for next year’s rise, given that the inflation and earnings data that usually form part of the triple lock have been so distorted by the pandemic.

“Inflation is likely to run higher in the coming months than the 3.1% recorded in September, which under the government’s plan to suspend the triple lock for a year, announced in September, is set to determine next April’s rise in the state pension. As a result of rising inflation, the fear is that pensioners could still be unable to cover their essential outgoings, such as energy and food bills, if this figure is used for the uprating. But the earnings figure of 8.1% was considered an unfairly high rise for pensioners and was behind the decision to scrap the triple lock for a year.

“In announcing the proposed temporary suspension of the triple lock, the government had committed to reinstate it after a year. There is always a risk it would not revert back as promised, particularly as doing so could result in a further cost to the government’s benefits bill. This amendment would potentially remove some of that risk.”

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