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19 June, 2020 Open access

Treasury Committee Chair suggests temporary suspension of wages element of pensions triple lock to prevent future ‘double digit’ increase

Chair advises that Chancellor will need to address the lock by 'carefully balancing the importance of protecting older people’s income against the impact on public finances’

The Chair of the Treasury Committee has suggested that there might need to be a temporary suspension of the wages element of the ‘pensions triple lock’ to prevent future 'double-digit' increases.

NB - the pensions triple lock is the Conservative Party’s commitment to guarantee up-rating of the basic and new state pension in line with the highest of prices (CPI), earnings, or 2.5 per cent.

Commenting today on the triple lock, and the impact of the coronavirus (COVID-19) outbreak on average wage levels in the current and coming financial years, Committee Chair Mel Stride warns that in its current form the triple lock will produce unintended consequences that need addressing -

‘This is largely due to the fact that in 2021 there will be a very significant increase in average wages relative to the level this year, which will have been depressed by millions of workers on furlough.

Inflation is also significantly lower than anticipated prior to the crisis, which will take some pressure off living costs.

The Chancellor will need to address the lock by carefully balancing the importance of protecting the income of older people, who often have limited opportunities for increasing their earnings, against the impact on the public finances.

A way forward might be to temporarily suspend the wages element of the lock. This might not entirely conform to the Conservative Party manifesto, but I think most people would recognise that a potential double-digit percentage increase is unrealistic.’

NB - the Guardian reported earlier this week that forecasts from the Office for Budget Responsibility show that a drop of more than 7 per cent in earnings this year, as a result of furloughed workers receiving 80 per cent of their wages, will be followed by an 18 per cent increase next year as furloughed workers return to full pay - an increase that would be reflected in future pension up-rating if the wages link remains.

Mr Stride’s comment on the pensions triple lock is available from parliament.uk