The government’s triple lock guarantees a minimum increase in the State Pension every year. From April 2021, all pensioners will receive a 2.5% increase.
How much will the State Pension pay?
The amount you receive depends on your year of birth and National Insurance contributions.
The basic State Pension (for those reaching state retirement age before April 2016) will be £137.60 per week, though various additions apply.
The new State Pension (for those reaching state retirement age after April 2016) will be £179.60 per week.
The State Pension is not the only government money available to support the elderly, particularly for those without a private or workplace pension.
What is the triple lock?
Since 2010, State Pension increases have been protected every year by the triple lock. This means that if wages fall, stagnate, or rise less than 2.5%, and inflation is less than 2.5%, there will still be a 2.5% increase in the State Pension.
With average wages falling in real terms in 2020, and the inflation rate calculated in September at 0.5%, this year’s rise will be 2.5% as that is the highest figure.
When the rate of inflation, measured by the CPI, is higher than 2.5% the State Pension increases in line with inflation.
Furthermore, after an increase in average earnings of more than 2.5%, if higher than the rate of inflation, pensioners receive the same percentage rise as earners. In 2020, the State Pension rose by 3.9% to reflect the increase in average earnings in 2019.
Therefore an increase of 2.5% every year is the least pensioners can expect to receive.
Is the triple lock under threat?
Will the government remain committed to the manifesto promise to safeguard the triple lock?
Traditionally, the Conservative Party relies on the votes of older citizens, so it is unlikely that they will jettison the triple lock without a very good reason. However, there is some uncertainty about the financial sustainability of this policy.
- Vast sums of money have been spent to compensate people for lost earnings during the pandemic. A review of pension provision may be seen as necessary in order to help ‘pay back’ these amounts.
- There is some controversy over the fairness of triple locking the State Pension when public sector wages don’t receive the same security.
- The overall burden on working-age taxpayers paying for State Pensions is considerable.
One alternative being discussed is a double lock instead. This would mean that State Pensions would be linked to whichever is the highest of wage increases and inflation. There would be no 2.5% lock. Therefore, under a double lock scheme, this year pensioners would be getting a 0.5% increase only.
State Pension rates: who are the winners and losers?
For many pensioners, the yearly top-up adds to a workplace or private pension. With other forms of income or capital, this increase is a bonus to those who may already have enough. However, the government expects the most comfortably off pensioners to pay for their own care when it is needed.
Many UK seniors face retirement with no private or workplace provision for old age. They rely on a State Pension that compares unfavourably with many other developed countries.
From April, pensioners will receive an extra £3.35 per week from the basic State Pension, or £4.40 per week from the new State Pension. Just enough to cover a TV licence (which is free for those on Pension Credit).
What does the future hold?
Whilst the State Pension is protected for the time being through the triple lock, there is no guarantee that this will continue. People of working age are advised to save for retirement through private pension schemes or their employer.
At the moment, many people are unable to think about saving for the future. State Pension levels will need to rise, in line with inflation at least, to protect them in their retirement.
Each generation will be waiting longer before they can claim. Without further increases, the older generation may wish to reject calls for them to stand aside to allow younger workers to take their place.
How much will I get when I retire?
Nearing retirement? Have a look at the government pension calculator to see where you stand.
