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'Will you stick to 8%?' Rishi Sunak drops huge hint 'costly' triple lock will be SCRAPPED

Ali KhanJul 08, 2021Business
'Will you stick to 8%?' Rishi Sunak drops huge hint 'costly' triple lock will be SCRAPPED

The State Pension triple lock could see the sum rise by eight percent this year, the Office for Budget Responsibility (OBR) has suggested. This is as a result of “unusual pandemic-related fluctuations in earnings growth” as many people get back into work. With many debating on whether the sum will be scrapped altogether due to this kind of increase, the Chancellor Rishi Sunak this morning appeared on BBC Breakfast to address the matter.

Responding, he said: “Charlie, as I have just said, I am not going to get drawn into speculating about what may or may not happen.

“What I can tell you is that our approach is being driven by fairness – both for pensioners and for taxpayers. And as I said, I recognise the concerns which people have raised about this matter.

“That is as much as I can say at this juncture, given that this is something which will be raised in the future.”

The question of fairness for both pensioners and taxpayers have led some to believe the Chancellor has dropped a major hint about the future of the triple lock, and ask whether a bumper increase will actually be enacted due to potential backlash from other sections of society, and 

Office for Budget Responsibility figures have suggested the extent of the cost of maintaining a triple lock which could rise to eight percent.

The organisation warned Rishi Sunak may have to draw together billions of pounds in order to protect the sum for state pensioners, which could create a strain on the public purse, particularly due to COVID-19 and existing support measures.

It has been estimated the Treasury would have to stump up some £3billion a year under a bumper pension increase.

The report read: “The triple lock raises spending by £0.9 billion for every one percentage point.

“If earnings growth in the three months to July period that determines triple lock uprating for next April was eight percent, as some expect, that would add around £3 billion a year to spending.”

An increase by eight percent would see the state pension rise to a full sum of £194 per week.

Pensioners would be entitled to this amount if they built up a suitable number of National Insurance contributions throughout their lifetime.

It is usually stated that to get any state pension at all, a person will need to have 10 qualifying years of contributions, and to receive the full sum, a total of 35 years of National Insurance are usually needed.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, commented on the matter, and said: “Rishi Sunak set the cat among the pigeons by departing from the usual line to defend the triple lock at all costs. The reference to fairness to taxpayers and pensioners, and highlighting concerns about costs, was the Chancellor waving bolt cutters around the triple lock – either to signal a break away from the policy or to gauge the reaction.

“The crisis has thrown up an inherent problem with the mechanisms behind the triple lock, because it’s unable to cope with sudden and spikey wage changes. Sunak could address this by adding an element of smoothing of wage figures, so the spikes are evened out to a more gradual rise.

“However, he might also use this as an opportunity to revisit the triple lock, which is a massive cost for the government at a time when it’s watching every penny.

“The Treasury could choose to drop the third lock, so the pension just rises with the higher of wage increases or price inflation. This would avoid pension incomes dropping behind rises in the wider economy, so the Government could argue that pensioners will be no worse off.”

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