Triple lock increase for April 2027 is 3.9% (probably)

mrklaw

it can first be a journey to an independent non political alignment to earnings or similar. Assuming it eventually moves to 70 it likely starts to morph into a backstop/longevity baseline with people increasingly encouraged to top up with private pensions.

Doesn’t need means testing if they can control costs in that kind of way. and means testing has a high risk of screwing up people’s contributions to private pensions which needs increasing, not decreasing. so hopefully they don’t even mention that

Cobbler_tone

No change before 2030 and then a double lock. I can't imagine too many people have enjoyed rises above inflation, although it has happened 8 times out of the past 14 years. Brave (and right move) IMO.

westv

https://forums.moneysavingexpert.com/discussion/comment/82152648#Comment_82152648

I can imagine the media lining up pensioners galore claiming they will all starve or freeze to death.

squirrelpie

https://forums.moneysavingexpert.com/discussion/comment/82152648#Comment_82152648

Wait and see what is really said at the end of the day. The suggested double-lock doesn't resolve the problem, since it still includes the gratuitous 2% and it also apparently includes a long-term connection to average earnings, which makes more sense.

mrklaw

https://forums.moneysavingexpert.com/discussion/comment/82152737#Comment_82152737

first, lets wait and see

second - it already often rises faster than earnings because it gets uplift from inflation when that spikes, then by earnings when that catches up next couple of years. That ratchet needed to go IMO and is a good change.

I do wish he’d gone a step further and proposed a board to review the correct level - either the same people that set minimum wage, or possibly the same people that review the pension age. But its a start.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82152336#Comment_82152336

with people increasingly encouraged to top up with private pensions.

This encouragement has already been going on for many years. Tax relief, auto enrolment etc. AFAIK all main political parties are agreed on the benefit of people building up private pension provision ( it also saves paying pensioner benefits).

However many people remain distrustful or simply can not afford it. The number of self employed people with pensions is very low.

The_Green_Hornet

The IFS has published a chart on what they believe the new pension triple lock would look like.

SnowMan

Had the state pension gone up by the greater of CPI and 2.5% each year from introduction, so April 2011 to April 2027 (inclusive of both) it would have increased by 81.7% by my calculations.

If the state pension had gone up with earnings inflation over the same period it would have increased by 72.2%

So it would be 5.5% (=1.817/1.722-1) higher now if it had increased solely by the higher of CPI and 2.5% than had it increased by earnings

It has gone up with the triple lock by 96.8% over this period. So it is 14.3% higher (=1.968/1.722 - 1) than had it increased with earnings.

So interesting that just increasing with the greater of CPI and 2.5% would have naturally ensured over the period that it had increased by more than earnings.

Of course this reflects the particular fluctuations over the period and not to be taken as what might happen in the future. It has been the years where CPI has been less than 2.5% (8 out of the 17 years) that would have given the state pension the oomph to grow more than earnings increases.

JohnB47

https://forums.moneysavingexpert.com/discussion/comment/82152826#Comment_82152826

Excellent post. However you are assuming that ‘prices’ means CPI. If Andy meant that, why didn’t he say so?

Linton

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https://forums.moneysavingexpert.com/discussion/comment/82152826#Comment_82152826

Yes, the current annual triplelock ensures that over the long term:

1. SP will rise more than inflation because in some years earnings rise more than inflation
2. SP will rise more than earnings because in some years inflation rises higher than earnings
3. SP will rise more than 2.5% a year because in some years either earnings or inflation are higher than 2.5%

This is rather different to the aim of SP rising with the higher of earnings/inflation and clearly cannot be afforded indefiniitely.

Thus the current triple lock is mathematically flawed. The proposal to removing earnings from the annual triplelock but rather have earnings related increases based on a longer time period would resolve the problem.