Pensioners could face the “double whammy” next April of a real terms cut to their state pension as well as the prospect of energy support being pared back, experts have warned. They could miss out on £8.50 per week or £442 per year in income if the state pension is increased in line with earnings next year instead of with inflation.
The triple lock is normally used to calculate the increase in the state pension but it was suspended for a year last year and state pensions instead rose by 3.1%. The mechanism would guarantee that state pensions increase by September’s inflation figure, wages or 2.5% – whichever is higher.
Consumer Prices Index (CPI) inflation rose by 10.1% in September, according to Office for National Statistics (ONS) figures released on Wednesday. Sir Steve Webb, a former pensions minister said that if the triple lock is maintained and pensions rise in line with inflation, the new state pension would rise from £185.15 per week to £203.85.
It would be the first time that the main state pension rate had exceeded £10,000 per year, he said. But if the state pension were to rise at 5.5%, in line with earnings, the weekly new state pension would be around £8.50 per week lower than this, adding up to an annual loss of £442.
He also warned there could be a double blow for pensioners as new Chancellor Jeremy Hunt has said universal help with energy bills under the energy price guarantee will only continue until April 2023, instead of the two years that was previously pledged.
A Treasury-led review will be launched to consider how to support households with energy bills from April 2023. Sir Steve Webb, who is now a partner at consultants LCP, said: “Breaking the triple lock could cost a single pensioner £442 per year.
“A reduced pension rise, combined with a cut in help on energy bills, could be part of a ‘double whammy’ for millions of pensioners.”
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “Despite Prime Minister Liz Truss highlighting her commitment to the triple lock on several occasions her new Chancellor does not seem so sure.”
She continued: “To be denied such an increase would come as a bitter blow to the many pensioners who rely on state pension as the foundation of their retirement income. Many of them will be have been under severe financial pressure in recent months as inflation pushed their essential bills ever skyward. Their difficulties will have been compounded by the triple lock’s suspension last year with the 3.1% increase given being no match for the events that followed.
“However, faced with a black hole in Britain’s finances, Jeremy Hunt is looking at making savings wherever possible and suspending the triple lock could save him a huge chunk of change – it will, however, be a disaster for pensioners already facing difficult times.”
Tom Selby, head of retirement policy at AJ Bell said: “The difference this decision will make to people’s state pension incomes from next year will be massive.
“For those struggling to make ends meet, that amount of money could make a real difference to their quality of life, particularly over the winter months.”
