Pensions ‘shouldn’t be a government piggy bank’ says Altmann
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The Government is currently planning to scrap the state pension triple lock for the 2022/23 tax year, but they were recently voted down in Parliament and told to rethink their decision. Temporarily suspending the triple lock would deny pensioners an historic increase to their state pension.
Payments were set to rise by up to £14 a week due to an usually high increase in average earnings growth, which was believed to be triggered by a large number of Britons returning to work from the furlough scheme.
The rate of average earnings growth was 8.1 percent, but following the Government’s decision, the state pension is currently set to increase by less than half that amount at just 3.1 percent next year.
It is believed scrapping the triple lock would save the Treasury £5billion.
Baroness Ros Altmann had spearheaded the calls for the triple lock to be kept in place, but with amendments included to take account of the financial impact of COVID-19 pandemic. A vote in Parliament was backed by a decision of 220 votes to 178 earlier this week.
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The proposed amendment would use an adjusted earnings measure roughly five percent, to take account of the exceptional impact of the COVID-19 pandemic on the rate of earnings growth.
Many people believe inflation could peak as high as 4.4 percent next year, whereas the state pension will only rise by 3.1 percent in April 2022 if the triple lock suspension is carried out.
This could mean that in real terms, pensioners may be left out of pocket if their income increases by less than the cost of living.
If the state pension does increase in line with September’s 3.1 percent inflation figure, the full basic state pension will rise by £4.25, from £137.60 per week to £141.85 per week, adding an extra £221 to pensioners’ income over the course of a year.
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The full new state pension would rise by £5.55, from £179.60 per week to £185.15 per week, meaning an extra £288.60 for the year.
If the earnings element of the triple-lock had been retained, the state pension could have increased by 8.3 percent next year. This would have increased the basic state pension to £149 per week and the flat-rate state pension to £194.50 per week.
That weekly increase of £11.40 and £14.90 per week would have meant a yearly boost of £592.80 and £774.80 for recipients of the full basic and new state pensions respectively.
That means the decision to suspend the earnings element of the triple-lock for 2022/23 could therefore cost retirees in receipt of the full new state pension £9.35 per week.
If the state pension increase were to be revised and implemented at five percent, it could make a significant impact on the weekly income of Britain’s pensioners.
The full new state pension would increase by £8.98 per week, up to £118.58. Over the course of a year, that would mean pensioners receiving an extra £466.96.
The full basic state pension would rise by £6.88 and would go to £144.48 each week. That would add up to an additional £357.76 for a year.
So while this would still be quite a bit less than the 8.3 percent increase pensioners could have received, it would mean retirees potentially picking up £178.36 more for the year than they would under the 3.1 percent increase.
While the 3.1 percent rise would represent the third-highest increase to the state pension in the last decade, a five percent boost would be the second-highest in the last ten years, behind only the 5.2 percent increase from the 2012/13 tax year.
An increase of 8.3 percent would have smashed the previous record by more than three full percentage points.
However, pensioners have been warned by various experts not to get their hopes up that the Government will reverse its decision to suspend the state pension triple lock.
Despite the recent vote, it is believed that ministers will likely reject the amendment and instead carry out their plan to temporarily suspend the triple lock for the 2022/23 tax year.
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