UK

Ministers considering way to cut cost of triple lock pension increase

The triple lock could be based on earnings with the impact of bonuses stripped out (PA)
The triple lock could be based on earnings with the impact of bonuses stripped out (PA) The triple lock could be based on earnings with the impact of bonuses stripped out (PA)

Pensioners may not get a bumper 8.5% increase in the state pension next year as ministers try to limit the cost to the taxpayer.

Under the triple lock – which guarantees an increase in line with average earnings, inflation or 2.5%, whichever is highest – pensioners would have been in line for a rise linked to wages from April.

But ministers are considering whether to strip out the impact of public sector bonuses on the earnings figure, which could mean an increase of around 7.8% instead, potentially saving the Government hundreds of millions.

ECONOMY Unemployment
ECONOMY Unemployment (PA Graphics)

Any attempt to tinker with the triple-lock mechanism would be highly controversial, but Work and Pensions Secretary Mel Stride stressed the need for any increases to take into account “affordability and the position of the economy”.

Mr Stride said the Government remains committed to the triple lock.

But asked whether that would be based on earnings including bonuses, the 8.5% figure, he told BBC Radio 4’s World At One: “There clearly is a difference if you take into account the non-consolidated elements of pay in recent times, but these are all decisions that I have to take with the Chancellor as part of a very clear process, a statutory process actually, that I go through in the autumn.

“So I didn’t want me to get into the weeds of exactly how I’m going to go about that. But the overarching point about the triple lock is that we remain committed to it.”

Put to him that he was not ruling out using a lower figure based on earnings without bonuses, around 7.8%, Mr Stride said: “I’m not going to get drawn into those kinds of questions.”

Estimates on average earnings are produced by the Office for National Statistics (ONS), with the figure for May-July typically used for that element of the triple lock.

The ONS said annual growth in regular pay excluding bonuses was 7.8%, but one-off payments in the NHS and civil service increased the overall average including bonuses to 8.5%.