State pension increases are usually protected by the triple lock but in recent months, the Government amended the rules so payment rises would be limited. These changes made it to the House of Lords where they voted 220 to 178 to back a cross-party move to keep the link between average earnings and payments.
“We commend the Lords”
The WASPI campaign welcomed this news, specifically for 1950s women who have already seen a number of changes made to their state pension arrangements.
A WASPI spokesperson told Express.co.uk: “WASPI women who were born in the 1950s and saw two increases to their state pension age without adequate notice will justifiably be alarmed at any proposal to alter the triple lock. These are women who are already negatively affected by facing retirement with a much smaller pension ‘pot’ than men, and who were significantly impacted by the pandemic with loss of jobs and the closing of many of the sectors in which they work.
“In addition to this the state pension in the UK is the lowest in the developed world. Many women rely solely on their state pension to fund their retirement.
“All of these factors make it easy for our generation of women to see themselves as a Government target for clawing back money. We have already sustained huge losses. We commend the Lords for their vote and call on the Government to seriously address the issue of the continued depreciation of the value state pension for women.”
A Government spokesperson previously told Express.co.uk: “We have carefully considered the fairest approach for both pensioners and younger taxpayers – our legislation strikes that balance while also ensuring pensioner incomes still receive a significant boost.
“This is a one-year response to exceptional circumstances and we plan to return the earnings element of the Triple Lock next year.”
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“A faint glimmer of hope”
Becky O’Connor, the Head of Pensions and Savings at interactive investor, broke down how impactful this vote was and what may happen next.
She said: “Millions of people who depend on the state pension have been offered a faint glimmer of hope this week that their income will continue to adequately cover rising living costs, as the House of Lords backed an amendment to use an alternative earnings figure rather than ditch the earnings element of the triple-lock guarantee completely.
“But the result of the vote will depend on whether it is backed by the House of Commons and if the Government can agree on a fair level for next year’s rise, given that the inflation and earnings data that usually form part of the triple lock have been so distorted by the pandemic.”
Inflation will likely be among the biggest factors on how the Government progresses, as Ms O’Connor continued: “Inflation is likely to run higher in the coming months than the 3.1 percent recorded in September, which under the Government’s plan to suspend the triple lock for a year, announced in September, is set to determine next April’s rise in the state pension. As a result of rising inflation, the fear is that pensioners could still be unable to cover their essential outgoings, such as energy and food bills, if this figure is used for the uprating.
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“But the earnings figure of 8.1 percent was considered an unfairly high rise for pensioners and was behind the decision to scrap the triple lock for a year.
“In announcing the proposed temporary suspension of the triple lock, the Government had committed to reinstate it after a year. There is always a risk it would not revert back as promised, particularly as doing so could result in a further cost to the Government’s benefits bill. This amendment would potentially remove some of that risk.”
The Government altered triple lock rules in September, effectively turning it into a “double lock”. Due to coronavirus anomalies, earnings levels were predicted to rise by around eight percent which would have cost the state billions in funding state pension top-ups for the coming year.
As such, MPs voted to suspend the commitment to raise pensions by whichever is the highest of inflation, average earnings or 2.5 percent each year. The need to factor in earnings was removed and it was confirmed state pensions would rise by 3.1 percent next year as a result.
The Government expected to save £5.4billion in 2022/23 following this but pensioners missed out on what was likely to be the biggest increase in a decade.
“Don’t hold your breath”
While many may feel a sense of hope following the Lords vote, Jon Greer, head of retirement policy at Quilter warned pensioners not to “hold their breath” for the future.
He said: “Tuesday saw defeat for the Government as the House of Lords rejected the proposed one-year triple lock suspension that would see pensioners lose out on an 8.3 percent pension increase.
“In real terms, pensioners may be left out of pocket if the suspension is passed, albeit that inflation during 2022 will be reflected in the uprating mechanism for 2023, but that may be held in scant regard by many pensioners in the immediate term.
“While a defeat is embarrassing for the Government, the Bill will return to the Commons where the amendment is expected to be voted down as they have privilege on financial matters.
“The debate surrounding the triple lock only further demonstrates the need to separate arguments around the level of the state pension and the method for uprating the state pension to ensure it is done in a way that is fair and sustainable. The Lord’s rejection likely gave pensioners a fleeting glimmer of hope, but they shouldn’t hold their breath.”
Additional changes
Changes to state pension payments is not the only element scheduled for alterations. The state pension age will also be changing over the coming years.
Currently, the state pension age is 66 for most people. However, this will be rising to 67 between 2026 and 2028.
Beyond this, it will rise to 68 by 2046.
The Government is also currently consulting on aligning the free NHS prescription age with the state pension age, which would push it from 60 to 66.
Express.co.uk has contacted the DWP for further comment.
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