The Government opted to suspend the state pension triple lock for the 2022/23 tax year in order to avoid a steep rise in the value of state pension, but based on the latest estimates around inflation, it appears that their efforts to keep state pension down may be thwarted.
The state pension triple lock is a Government guarantee, which ensures that the value of the state pension will increase every year by the highest of three values, inflation, average earnings growth, or 2.5 percent. This is done to help Britain’s retirees maintain their spending power over time.
However, due to the economic impact of the COVID-19 pandemic, average earnings growth looked set to balloon this year to unusually high levels, up to more than eight percent, which would have meant a large increase to the state pension.
Therefore, the Government decided to suspend the state pension triple lock temporarily for next year, removing the average earnings growth element and essentially creating a ‘double lock’, with the higher of inflation and 2.5 percent now the determining factors behind state pension value.