The Financial Times has reported that Rishi Sunak is preparing to break the Conservative party’s “triple lock” state pension pledge, amid Treasury fears that the policy could become unaffordable because of the fallout from the coronavirus crisis.
In an article published yesterday (16 June) the FT reported that the chancellor has been warned that unless he breaks the pledge next year, the value of the state pension could rise sharply - and it is understood the Treasury has noted with alarm official forecasts that wages could soar in 2021 as they rebound from an artificial dip caused by the government's job retention scheme.
As it currently stands, the triple lock ensures the state pension goes up by whichever is higher — wages, inflation or 2.5%.
Commenting on the article, Canada Life technical director Andrew Tully said: "A change to the triple lock would adversely affect many pensioners. However, as the costs of helping the economy deal with the impact of Covid-19 spiral, the government will need to look at various measures to cut spending and increase taxes.
"It's unclear at this stage if Rishi Sunak is proposing a long-term change to the triple lock, or simply a change for the next year or two, due to the fact the calculation basis for the earnings part of the triple lock could result in a significant increase. If it is a longer-term change, a move to a double lock of inflation, or earnings growth, would safeguard pensioners to a significant degree and mean state pensions won't fall behind the cost of living or increases in average earnings. However, the savings for government in moving to a double lock are modest compared to a more fundamental change."
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