Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner. Facebook Messenger An icon of the facebook messenger app logo. Facebook An icon of a facebook f logo. Facebook Messenger An icon of the Twitter app logo. LinkedIn An icon of the LinkedIn logo. WhatsApp Messenger An icon of the Whatsapp messenger app logo. Email An icon of an mail envelope. Copy link A decentered black square over a white square.

Is the triple lock on pensions about to become a casualty of Covid-19?

Paul Gibson, Granite Financial Planning.
Paul Gibson, Granite Financial Planning.

The UK Government is widely expected to end or at least water down the “triple lock” on pensions. Paul Gibson takes a look at just what is at stake.

There has been much speculation whether the government is planning to break a key manifesto pledge to maintain the triple lock by increasing the state pension by 2.5%, rather than using earnings data.

What is the pension triple lock?

Introduced in 2011 by the coalition government, the triple lock guarantees the basic state pension will rise by a minimum of either 2.5%, the rate of inflation or average earnings growth, whichever is largest.

What is the new state pension worth?

The full new state pension is £179.60 per week. The actual amount you get depends on your National Insurance (NI) record, with 35 years of NI credits giving you the maximum amount.

You’ll usually need at least 10 qualifying years on your NI record to get any state pension.

The cost of buying an equivalent income using an inflation-linked annuity would be around £320,000 at today’s market rates.

The full, old basic state pension – for those who reached state pension age before April 2016 – is £137.60 a week. The triple lock applies only to this element and not Serps (State Earnings Related Pension Scheme) or S2P (state second pension), which were earnings-related parts of the old system and linked to inflation.

Why has Covid changed things?

As people come off furlough and return to full pay, this is recorded as a large rise in average earnings.

It leads to a unique situation, and one which economists describe as an anomaly.

Average earnings could go up by 8%, hence the equivalent rise in the state pension. That is considerably higher than rises seen under the triple lock during the past decade.

Isn’t an increase a good thing?

Any increase in the state pension should benefit everyone over the long term, but pensions are paid out of current tax receipts and those footing the bill will, ultimately, be those who have yet to start receiving their state pension.

The cost of each 1% rise in state pensions costs the taxpayer around £850 million per year, so a large increase will have a significant impact on government finances that are already under huge pressure.

Critics say the triple lock is unsustainable in its current form, but it has undoubtedly helped to improve living standards for those in retirement.

What happens next?

Chancellor Rishi Sunak has a difficult decision to make to ensure intergenerational fairness and avoid any erosion of state pension benefits.

A possible alternative to scrapping the triple lock altogether would be for an adjustment to be made to reflect the unique results of the pandemic causing an artificial increase to earnings.

What should you do?

The decision will, ultimately, be taken by government but it is good practice to check your state pension entitlement periodically. More information can be obtained by visiting www.gov.uk/check-state-pension

This service can help to find out how much state pension you may get, when you can get it and how to increase it, if you can.

Paul Gibson is the managing director of Banchory-based Granite Financial Planning.


Money experts urge caution after Nationwide confirms post-lockdown spending splurge

Pension pots – what to do with them?