If you’re currently receiving or have been looking into the State Pension, then you’ve probably heard of the ‘triple lock’. But what is it? And how does it affect how much State Pension you’ll get? We cover what you need to know.
What is the triple lock?
The triple lock was introduced in 2010. In a nutshell, its purpose is to make sure that the State Pension doesn’t lose value over time. It guarantees that, each year, the State Pension will rise by the highest of three measures:
- Average earnings,
- Inflation, as measured by the Consumer Prices Index (CPI),
- Or 2.5%.
So, for example, if average earnings rose by 2% and inflation rose by 3% in a year, then the State Pension would be increased by 3%.
Why is the triple lock important?
First it’s important to understand the impact inflation has on your money. Inflation is the rate at which the price of goods and services increases over time. So if the rate of inflation is 1%, that means that prices have risen by around 1% on average. For example, if a packet of pasta cost you £1 a year ago and the inflation rate is 10%, it’ll now cost you £1.10. The government has set an inflation target of around 2%, but recently inflation rates have been much higher.
The triple lock aims to protect pensioners against the impact of inflation. If the State Pension didn’t change but the price of goods and services continued to increase over time, then you wouldn’t be able to buy as much with it. Meaning you’d be losing money in real terms. You can find out more about the impact of inflation in our article.
What does the triple lock mean for me?
If you’re currently receiving the State Pension, then the triple lock helps to protect your income. It guarantees that your income will be fair when compared to those still working. In some cases, it means that your State Pension could even beat inflation.
Who qualifies for the triple lock pension?
Anyone receiving the State Pension will benefit from the triple lock.
Why was there the double lock on State Pensions for 2022-23?
The government previously announced that the triple lock would be suspended for the 2022-23 tax year. This was because average wages were rising by over 8% at the time, following the coronavirus pandemic. So sticking with the triple lock would mean that the State Pension increase would need to match this – an unusually high amount. By suspending it, the government aimed to ensure fairness between pensioners and taxpayers.
What changes to the triple lock were announced in the 2022 Autumn Statement?
In the 2022 Autumn Statement, the Chancellor confirmed that the triple lock will be reinstated from April 2023. This means the State Pension will rise in line with September’s inflation rate – 10.1% – in the 2023-24 tax year. This is the biggest ever increase to the State Pension and will be welcome news for pensioners.
Jenny Holt, Managing Director of Customer Savings and Investments at Standard Life, has said: “The triple lock has proven to be a political hot potato with its fate hanging in the balance for a number of months. Many pensioners will be breathing a sigh of relief at today’s confirmation that benefits will be uprated in line with inflation. For those eligible for the full single tier State Pension, the move will take the annual value of the benefit to over £10,000 a year for the first time.”
Where can I find out more about the State Pension?
For more on the State Pension, including how much you get, when you can get it and if it’s enough, read our State Pension article.
The information here is based on our understanding in November 2022 and shouldn’t be taken as financial advice.