• The state pension triple-lock will be scrapped for 2022/23, the Work and Pensions Secretary has announced
• The flat-rate and basic state pension will instead increase by the highest of inflation or 2.5%
• A 2.5% state pension increase would mean:
o those in receipt of the full flat-rate state pension could see their payment increase from £179.60 per week to £184.10 per week
o those in receipt of the basic state pension could see their payment increase from £137.60 to £141.05
• Government anticipates an 8% spike in earnings in the three months to July – potentially costing the Exchequer billions of pounds
Tom Selby, senior analyst at AJ Bell, comments:
“The Government has decided to load all the bad news into a single day, breaking not one but two manifesto commitments.
“The decision to scrap the state pension triple-lock for 2022/23 was undoubtedly linked to today’s social care announcement, with Prime Minister Boris Johnson keen to ensure that, optically at least, both younger and older voters are sharing the burden of Coronavirus-related costs.
“Whether or not voters will forgive the Government is another question entirely, however. Research carried out by AJ Bell yesterday suggested just 8% of people support any change to the triple-lock – although it is possible this particular piece of bad news will be largely buried by the National Insurance hike announced earlier today.
“However, it’s worth noting the cost of the state pension triple-lock risked ballooning if, as expected, average wages come in at 8% or higher for the three months to July.
“The Office for Budget Responsibility estimates every 1 percentage point increase in the state pension costs the Treasury about £900 million.
“This would imply a cost of £7.2 billion compared to freezing the state pension at the current level, versus a £2.25 billion cost if it is uprated by 2.5%.”
