Prime Minister David Cameron has promised to keep the state pension triple-lock in place for the next five years.
The measure, announced in the Queen’s Speech at the State Opening of Parliament, is meant to give pensioners certainty about their income.
The triple lock was introduced during the last Parliament and guarantees an annual increase in the state pension as the highest of three measures:
- A minimum increase of 2.5% each year
- The rise in prices measured by the consumer prices index
- The rate of increase of average annual earnings
As inflation and earnings increase were below 2.5% last year when the state pension rise was calculated, the state pension went up 2.5% to £115.95 a week.
How much is the triple lock worth?
If the pension only rises at 2.5% a year for the next five years, the increases will be:
- April 2016 – £2.89 to £118.85
- April 2017 – £2.97 to £121.81
- April 2018 – £3.04 to £124.86
- April 2019 – £3.12 to £127.98
- April 2020 – £3.19 to £131.18
The figure is set by measuring the triple-lock indices in September each year.
The rise only applies to retirees receiving the current state pension before the flat rate comes into effect from April 2016.
The flat-rate has yet to be confirmed, but is expected to be worth around £155 a week. The triple-lock will also be applied to that rate; while pensioners receiving the current state pension will continue will stick with their payments under that scheme.
The government is putting pensioners at the heart of the long-term economic plan as the country recovers,” said a report published with the Queen’s Speech.
“The triple lock will continue to apply to the basic state pension for the duration of Parliament.
Call for flat rate clarification
“This will make sure pensioners who have worked hard and contributed national insurance during their working lives have their incomes protected.
“The government wants to give pensioners financial security and certainty and ensure they see adequate increases in the basic state pension.”
The report also confirmed other benefits such as winter fuel payments, free bus passes, TV licences, and free prescriptions will also continue.
“This move will be welcomed by pensioners and those approaching retirement, but we still need clarity on whether the triple lock will definitely apply to the flat rate pension so people can make sensible and informed retirement income decisions,” said Kate Smith, of pension provider Aegon.
“This is vital so people can make up their mind about how to access their new pension freedoms.”