For the last ten years, basic and new state pensions have been subject to the ‘Pension Triple Lock’.
The triple lock is a government commitment which was introduced in 2010 and ensures the UK state pension will rise in line with whichever is the highest rate of:
- Average earning growth year-on-year for the May – July period
- Inflation (using the consumer prices index measure) in the year to September
The uplift is confirmed in November and applied, every April, at the start of the new tax year.
The triple lock was agreed, by all major political parties, to be maintained from the 2015 election onwards. However, there is no actual legislation behind it, as the law is set to increase pensions by the percentage of earnings growth and is ultimately decided by the Secretary of State at the Department for Work and Pensions.
Now the UK has begun to rebound from the pandemic, earnings have done so too, with the latest annual rise at a minimum of 8.8%.
What has changed?
The Department for Work and Pensions has now suspended the triple lock from the 2022-2023 tax year. It will no longer take account of average earnings growth and will either rise at the rate of inflation or 2.5%, and so has effectively become a ‘Pension Double Lock’.
At this time, it is a good idea to use the government website to check the forecast on your state pension in 2022.
KLO Financial Services
If you’d like to find out more about choosing the right pension for you and maximising your income after retirement, KLO Financial Services are local financial advisers who specialise in personal financial management as well as providing independent pension advice.