The State Pension is awaiting a rise in April 2021, thanks to the Government’s Triple Lock guarantee. Head of Pensions for Interactive Investor, Becky O’Connor, said: “The State triple lock is showing its worth and will help protect the income of millions of pensions from next year. But the fact it has kicked in could mean there is a risk the Treasury decides to tinker with this valuable protection. Millions of people rely on the State Pension to cover their living costs and it’s already, arguably, not generous enough.”
How does the Triple Lock work?
The Triple Lock guarantee sees that State Pension income rises on a yearly basis.
In short, this means the Government is looking at three figures throughout the year, and whichever is highest, is the sum by which the State Pension is increased – capped at 2.5 percent.
Annual wage growth in July, CPI inflation rates in October, and 2.5 percent are the deciding factors for the triple lock.
Whichever is the highest is the one which will determine the following year’s State Pension increase.
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How much will the State Pension be in 2021/2022?
The State Pension will rise by 2.5 percent in April, thanks to the triple lock.
The Triple Lock tries to be fair to pensioners, and ensure there’s some kind of increase on a yearly basis given that many rely on the money.
This means those receiving the new State Pension will see their weekly payments rise
As a result, those pensioners will receive an additional £228.80 by the end of the 2021/2022 tax year.
Will the Triple Lock be scrapped?
There is increasing speculation that Chancellor of the Exchequer Rishi Sunak will look at the State Pension triple lock as a means to cut costs going forward.
Many people think it’s not fair for future workers to see their finances suffer while pensioners get a yearly increase.
Personal Finance analyst at Hargreaves Lansdown, Sarah Coles said: “Next year, assuming furlough is at an end, wages are expected to rise significantly.
“So the Triple Lock would give state pensioners a huge pay rise at a time when the working population is still likely to be clawing their way back from the economic effects of the crisis.
“Many people have been calling time on the triple lock for years, but worries over its distorting effect on income between pensioners and workers in the fallout from the pandemic could tip it over the edge.”
However, Ms Coles said this doesn’t have to mean the Government is getting rid of the scheme forever, more likely just implementing some changes here and there.
“This doesn’t necessarily mean some sort of guaranteed rise would be axed altogether.
“We could see the removal of the 2.5 percent underpin, or a smoothing of earnings, so the Government could technically keep the lock while reducing its power.”