State pension: Warning issued over future of triple lock as £14K increase looms
State pension may rise above £14,000 a year by 2030 if inflation proves more stubborn than official forecasts, a new study has revealed
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State pension may rise above £14,000 a year by 2030 if inflation proves more stubborn than official forecasts, a new study has revealed.
The "triple lock" means state pension payments increase every year by the highest of price inflation, average earnings growth or 2.5 per cent.
Official forecasts suggest state pension could jump to £13,230 a year even if inflation follows current Bank of England projections, according to finance firm AJ Bell.
This year, the Government honoured the triple lock and gave pensioners a 10.1 per cent boost to £10,600, or £203.85 a week.
Official forecasts suggest state pension could jump to £13,230 a year even if inflation follows current Bank of England projections
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This autumn, key inflation and wage growth figures will be published to determine the annual increase next spring.
The inflation rate figure used in the calculation is taken from September, and published around mid October, and the key earnings figure is for the three months to July, which is published in September.
The Office for Budget Responsibility recently revealed that spending on the state pension in Great Britain is set to be £124billion in the current financial year.
"The triple-lock remains fundamentally unsustainable but politicians fear angering older voters if they abandon the pledge," Tom Selby, head of retirement policy at AJ Bell told the Daily Mail.
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"Spiralling inflation has been squeezing household budgets for the best part of two years now. However, the triple lock has helped shield retirees from this pain.
"This state pension protection is understandably popular among retirees but comes at a significant cost to the Exchequer."
Selby added that the real terms rise in cost will put pressure on the Government to raise taxes, cut spending in other areas, or find savings from the state pension system.
He added: "While committing to the triple-lock might be viewed as the easy option politically for now, at some point, someone will have to be brave enough to admit this cannot go on forever.
This year, the Government honoured the triple lock and gave pensioners a 10.1 per cent boost to £10,600, or £203.85 a week
Pexels"If it did, the state pension would eventually be worth more than average earnings."
The Bank of England is currently forecasting inflation will be 7 per cent in September, which would make it around £11,340.
Interactive Investor's head of pensions and savings Alice Guy said: "Signs are that the labour market is easing, so wage growth may fall faster than inflation during the summer.
"If this happens then inflation in September rather than wage growth could be the determining factor for the state pension triple lock next year."
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