Steven Cameron, Pensions Director at Aegon, comments: Confirmation of honouring the triple lock for 2023/24 means pensioners can breathe a huge sigh of relief after a white knuckle roller coaster ride of past disappointments, new promises and a series of U-Turns. But next year’s increase could be its ‘last gasp’ as the current formula is looking increasingly unsustainable.
“Financially, it won’t have been an easy decision for the government looking to fill a £50bn fiscal black hole – every 1% increase in the state pension costs around £0.9bn a year. And this isn’t paid for out of some fund built up in the past but from the National Insurance paid for by today’s workers.
“Honouring this Manifesto commitment after ditching it last time round will provide much needed support for pensioners, many of whom are on low and fixed incomes and particularly vulnerable to rampant inflation. The government will no doubt have weighed up the reaction of pensioner voters if they scrapped the triple lock for a second consecutive year in the run-up to the next general election.
“But there’s a huge question mark over whether any party would recommit, in a future Election Manifesto, to paying the highest of price inflation earnings growth or 2.5% year on year. In volatile times, using an average over 3 years or even paying out the average of inflation and earnings increases each year might be more sustainable for Government and predictable for pensioners.
“The outcome of the review of state pension age is also to be published early in 2023 and on affordability grounds, this needs to be considered alongside the future of the triple lock.
“Today’s confirmation means those on the full new state pension will see weekly payments increase from £185.15 to £203.85 per week (£10,600 a year) and those on the full basic state pension will see weekly payments increase from £141.85 to £156.20 per week (£8,122 a year).”
Commenting on the retention of triple lock, Chris Noon, Partner, Hymans Robertson comments: “There is welcome relief that the Government has stuck to its manifesto promise and retained the triple lock providing pensions with long-term protection. With the cost of living crisis and rising inflation set to continue, too many pensioners continue to live on extremely low incomes leading to evermore worry for many. The UK State Pension is one of the worst in the OECD and is the primary reason that the UK has such high levels of pensioner poverty. The triple lock provides long-term mechanism for increasing State Pension relative to other wealthy countries and must be retained for the long-term.”
Andrew Tully, Technical Director at Canada Life said: ‘This will be welcome news to the millions of pensioners struggling with the current cost of living crisis. However, given inflation for pensioners is likely to be higher than the headline 10.1% it may not completely cover the increases people are seeing in their outgoings. There is a sting in the tail as there is potential for the state pension to exceed the frozen personal income tax threshold by 2028, potentially dragging many millions more pensioners into paying income tax.’
PensionBee CEO, Romi Savova commented: “It’s reassuring to see the Chancellor confirm the future of Triple Lock, as next year’s increase in benefits and pension payments will be tied to inflation, while pension credit will also rise by 10%. This will provide vital extra support to pensioners to help bridge the gap of the increased cost of living and prevent the real problem of pension poverty.”
Joanne Segars, Chair of Trustees at NOW: Pensions, comments: “Retirees will be reassured by the Chancellor’s commitment to the triple lock. This will bring much-needed respite to retirees who rely heavily on income from the State Pension to get by. Without today’s action, there was a possibility pensions would have just risen in line with average earnings, which rose by only 5.7% in the year to September, excluding bonuses. This would have left pensioners at a significant financial disadvantage, with inflation now sitting at 11.1%.
“For pensioners and anyone approaching retirement, this news is a welcome relief at a time when the value of retirement pots has been particularly volatile as a result of wider market uncertainty. The government’s decision to take this necessary step is fundamental to protecting the wellbeing of this group in the years to come.”
“The Chancellor’s announcement of targeted support in the form of a £300 additional payment to pensioner households
Catherine Foot, Director at Phoenix Insights, the longevity think tank that is part of the UK’s largest long-term savings and retirement company Phoenix Group, comments: “Pensioners have been on tenterhooks waiting for confirmation from Rishi Sunak’s government on reinstating the state pension triple lock for 2023/24, so today’s announcement will be welcome news for the millions relying on these payments. Many of the most vulnerable pensioners are struggling to meet the demands of the rising cost of living and have already faced a below-inflation increase in payments last April.
“While the government has committed to the triple lock in the immediate-term, there are real concerns about whether this will be maintained in future years. Research on attitudes towards the state pension from Phoenix Insights, Phoenix Group’s longevity think tank, found around a third (34%) of adults in the UK are fearful that the state pension won’t exist in the future. However, the majority believe that providing the state pension is an essential role for the government in order to ensure everyone has a minimum level of income in retirement*.
“If we do see reforms in state pension provision, it is important the most vulnerable are protected from pensioner poverty. For most, relying on the state pension alone won’t provide an adequate income in retirement. And, with the state pension age set to rise to 67 and then 68 in future years, now is a crucial time to think about how we can best support individuals to build confidence in their financial futures.”
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