MPs have voted against a House of Lord amendment that sought to keep a link to earnings when re-rating the state pension in April.
The amendment, proposed by former pensions minister Baroness Ros Altmann, forced the House of Commons to vote again to on plans to ditch the triple lock for the forthcoming year.
The Lords argued for an alternative figure to be used, rather than July’s earnings figures, which would raise the state pension by 8.3 per cent under the normal triple lock. This figure has been higher due to the distorting affect of furlough payments on wages.
But MPs have rejected this alternative, meaning the state pension will be increased in line with September’s inflation figure of 3.1 per cent for the 2022/23 tax year.
With inflation expected to hit 4 per cent next year, there are concerns this could leave many pensioners struggling to meet rising prices, particularly with fuel and food bills driving price increases.
Tom Selby, head of retirement policy at AJ Bell, says: “The decision to row back on a clear manifesto commitment that hits pensioners in the pocket will not have been taken lightly by the Chancellor and the Prime Minister, so it is no surprise to see the Government standing firm in the face of opposition from the House of Lords.
“The Lords want the Government to retain the earnings element of the triple-lock but explore using an alternative measure that flattens the post-lockdown spike we have seen in 2021.
“However, pensions minister Guy Opperman said last night it would not be possible to produce a reliable alternative earnings measure.”
Selby adds that even a small extra increase in next year’s planned state pension would have left the Chancellor with a sizeable hole in his spending plans, with the Chancellor estimates to say around £5bn by abandoning the triple lock this year. He says: “Every 1 percentage point increase in the state pension adds around £900 million to its cost – money which would likely have to be found from elsewhere.”
Interactive investor head of pensions and savings Becky O’Connor adds: “It’s disappointing for pensioners that the Treasury could not find an alternative that would better protect pensioner incomes against inflation than the measure being used this year.
“September’s inflation rate of 3.1 per cent now looks to be on the low side given sharply rising energy, food and fuel bills. There is a real risk that some pensioners will struggle to stay warm and well fed this winter.
“But the longer-term threat is that the door is now open for the state pension triple lock to be scrapped for good. This is worrying. The Government says it will reinstate the triple lock after a year – but a lot can happen in a year and the risk is that the Government will renege on this promise.
“For future generations of workers, who might one day depend on the state pension for the bulk of their retirement income, the chipping away of the triple lock is concerning.”