Treasury Committee calls on Chancellor to suspend earnings element of triple lock

The Treasury Committee has called on Rishi Sunak to temporarily suspend the earnings element of the pensions triple lock.

This follows the Committee’s letter to the Chancellor in June which asked whether the Treasury would consider a suspension or temporarily calculating the wage growth differently.

In his reply to Committee’s letter in August, Sunak said the government was continuing to “examine the data as it becomes clearer”.

The triple lock ensures the state pension will increase each year by whichever is the greatest measure out of average earnings, the consumer prices index, or by 2.5%.

However, Office for National Statistics (ONS) data shows that average weekly earnings were 8.8% higher in the three months to June this year than they were in the same period in 2020, following large numbers of workers who were furloughed amid the first UK lockdown. Weekly earnings were also 8.7% higher in June 2021 alone than they were in the same month of last year.

Chair of the Treasury Committee, Mel Stride, said today: “Over the last decade, the pensions triple lock has successfully protected the incomes of older people, who often have limited opportunities to increase their earnings. However, the ‘triple lock’ is unsustainable in its current form.

“A potential almost double-digit percentage rise is unrealistic and unfair, with knock-on effects for the public finances.

“Given that average wage levels have been skewed by the unprecedented events of the past 18 months, the Chancellor should temporarily suspend the wages element of the lock. This is a sensible approach which will aid our recovery from the pandemic.”

Commenting on the Treasury Committee’s stance, interactive investor head of pensions and savings, Becky O’Connor, added: “In practice, there is a risk that any temporary measure becomes permanent.

“If the earnings element of the lock was lost for good, this could mean that pensioners’ living standards could fall behind those of the working population, in periods when wage growth genuinely exceeds 2.5% or inflation.

“If a change of this kind is to be made now, then a timeline for a commitment to return to the triple lock might provide reassurance that this element of the guarantee would not be gone forever.”

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