The government has suspended the triple lock formula for annual state pension increases, limiting this year's rise to 2.5%. Should the triple lock have been maintained, the post-pandemic rise in average earnings would have seen pensions increasing by 8%.

The Secretary of State for Work and Pensions told parliament that the government was suspending the wage element of the triple lock. Therese Coffey MP, pointed to figures from the Office of National Statistics that showed that from August the average weekly earnings increased by 8.8%. "We experienced an irregular statistical spike in earnings over the uprating review period, I am clear that another one-year adjustment is needed."

Should the state pension have risen by 8%, it would have produced a recurring cost of over £4bn a year for the Treasury.

By suspending the wage element, the pension increase will be 2.5%, currently higher than inflation. This was the same increase in state pension as the previous year. In addition to those receiving basic and new State Pensions, this increase will apply to those receiving Standard Minimum Guarantee in Pension Credit and widows’ and widowers’ benefits in Industrial Death Benefit.

What is the triple lock?

Introduced in 2010, the new formula saw state pension increase in line with the highest rate among three economic indicators.

  • A base level of 2.5%.
  • Inflation, as measured by the Consumer Prices Index (CPI)
  • The average wage increase.

Useful guides on this topic

Pensions: At a glance
Pensions are a 'tax advantaged' method of saving funds for your retirement. This guide provides you with the key contribution limits and savings allowances. Subscribers, follow the links below to more detailed guides.

Pensions: tax rules and planning
What tax rules apply to pensions? What tax relief is available? What tax charges can arise? What planning opportunities are there? 

Pensions contributions: personal v company?
Is it more tax efficient to pay pension contributions personally or via your own company?

Pensions: tax charge for excess contributions
When does a tax charge arise for excess pension contributions? What are taxpayers' responsibilities under Self Assessment?

External link

Oral statement to Parliament: Annual review of State Pension and Industrial Death Benefit rates

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