On 13 October 2021, the second reading of the Social Security (Up-rating of Benefits) Bill is scheduled to take place in the House of Lords.
The bill would allow the Government to set aside the earnings requirement of the triple lock for assessing state pension increases for the 2022/23 financial year. Instead, state pensions would be increased by 2.5% or the rate of inflation, whichever is higher. This would also apply to certain related benefits, including the standard minimum guarantee in pension credit and the survivors’ benefits in industrial death benefit.
The triple lock is a Conservative Party manifesto commitment. It guarantees that state pensions increase each year by whichever is the highest of inflation, wage growth or 2.5%.
The Government has explained that the decision to set aside the earnings measure is a temporary one. The decision is a reaction to a “statistical anomaly” whereby earnings have increased by over 8% in recent months as the economy recovers from the coronavirus pandemic. The Government has said that increasing state pensions in line with earnings this year could lead to tough public spending decisions elsewhere. However, the Government has emphasised its commitment to the triple lock policy and stressed that the earnings measure is only being set aside for this year’s review. It has been estimated that increasing state pensions by 2.5%, rather than around 8%, could save the Government approximately £5 billion. The latest consumer price index figures, usually used to measure inflation, showed a 3.2% increase for the 12-month period up to August 2021.
All stages of the bill were taken in the House of Commons on 20 September 2021. Opposition parties criticised the bill, highlighting that the policy represented a broken manifesto commitment. Labour and the Scottish National Party both tabled amendments calling on the Government to publish a review of the impact of the policy, particularly in relation to pensioner poverty rates. However, these amendments were unsuccessful, and the bill passed its Commons stages without amendment.
Age UK has also called on the Government to review the policy, stating that pensioners would be worried about the future of the triple lock and that more measures were needed to ensure pensioners could live comfortably in retirement. The Pensions Policy Institute accepted that the 8% earnings increase put the Government in a “tricky position”, but suggested it consider earnings over the last two years instead. The Institute for Government backed the temporary measure, believing it offers a “reasonable outcome” in light of public finances.
The Government also implemented temporary changes to the state pensions uprating review in 2020. On that occasion, the legislation ensured that state pensions could be increased for the 2021/22 financial year, despite negative wage growth. As a result, state pensions were increased by 2.5% for the 2021/22 financial year.