State pension update: Triple lock decision ‘certain’ to be overturned by Rishi Sunak
Budget 2021: Experts outline state pension changes
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Last week, the House of Lords passed an amendment which called on the Government to rethink its proposal to temporarily suspend the triple lock for one year. Led by Ros Altmann, peers in the House of Lords are pushing for the Government to take into account the financial impact of the pandemic, while still keeping the triple lock pledge in check. However, experts are warning that this decision is all but “certain” to be overturned by the House of Commons in the near future as the Chancellor will have to rethink his Budget if peers’ demands were to be accepted.
As part of the triple lock pledge, state pension payments are supposed to rise by the highest of inflation, average earnings growth or by 2.5 percent.
Due to furlough artificially inflating wages over the last 19 months, Mr Sunak announced plans to temporarily scrap the promise to raise the state pension by the rate of average earnings.
Average earnings growth for the year came to 8.3 percent, which would have seen a similar rise in state pension payments from April 2020.
The decision to scrap the triple lock pledge on state pensions has resulted in anger from many pensioners across the country.
Calling on Rishi Sunak to keep his triple lock promise, Baroness Altmann said: “The Government is able to adjust the earnings data to account for the impact of the pandemic measures.
“We are already in a cost of living crisis and official forecasts are for inflation to rise to four percent and maybe much more next year.
“’It is a matter of principle and trust. Pensioners are not a piggy bank for Chancellors to raid when money is tight.
“They are not a cash machine that the Treasury can take money from when they want to spend on other priorities. Pensioners deserve better.”
Experts, such as former Pensions Minister Steve Webb, outlined why it’s likely the House of Commons will reverse this move from peers in the House of Lords.
Sir Steve said: “Even though no government likes being defeated in the House of Lords, sometimes they will consider a concession in order to get their legislation through.
“But on an issue like this, there seems no prospect of a government concession when MPs are asked to consider the issue again.
“An alternative measure of earnings growth could lead to a multi-billion pound bill which could cause the Chancellor to re-write his Budget.
“By convention, the House of Commons has supremacy when it comes to financial matters and the Lords will come under great pressure to back down if the Commons simply vote down today’s amendment.
“The Government seems certain to use its comfortable majority in the Commons to overturn this defeat in the House of Lords.”
“But it is a sign that any attempt to drop the triple lock for more than one year could meet some stiff resistance.”
If the rate of average earnings were to be used to hike state pensions, pensioners would have seen a rise in the basic rate, taking it to £149.00 or around £7,750 per year.
This would see the full flat rate of the state pension jump to £194.50 and around £10,110 annually.
However, the basic state pension will now increase £4.25 to £141.85 per week, or an estimated £7,370 a year under current plans.
Furthermore, the full flat rate of the state pension will rise by £5.55 to £185.15 per week, or around £9,630 a year.
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