The government has promised to protect the “triple foreclosure” to increase pension payments – but Mr Sunak hinted last month that it could be removed because voters wouldn’t see it as “fair.”
The triple lock-in guarantee now appears to increase pensions by around 8% – costing taxpayers between £ 3-4 billion – as wages have rebounded so strongly after the Covid crisis.
Average total earnings rose 8.8% in the last quarter compared to the same period last year, according to the latest data from the Office for National Statistics.
Former Pensions Minister Steve Webb said such growth would increase the state pension from £ 9,340 to over £ 10,000 a year.
“These numbers put pressure on the Chancellor because he will want to stick to his triple lockdown policy, but not pay retirees a huge increase,” the retirement expert said.
Speculation is rife that the Chancellor could drop the triple lock, the promise to raise state pensions by the highest of three measures – the annual rise in average incomes, the annual rise in the index consumer prices (CPI) or 2.5%.
Julian Jessop, economics researcher at the Institute for Economic Affairs, said: “The 8.8% rise in average wages in the three months to June provides more ammunition for those who argue that the ‘triple lockdown’ of the state pension must be abolished. ”
When asked last month whether it was’ fair ‘that pensions could increase by 8% while universal credit payments are cut, Mr Sunak said:’ I think these are all concerns. legitimate and fair facts to raise ”.
Mr Webb, pensions minister under the coalition government of David Cameron, now a partner of LCP financial consultants, said the Chancellor’s most likely option was to seek a measure of earnings growth that “eliminates” l effect of the pandemic.
He suggested using an “underlying” earnings growth measure, dropping between 2.4% and 3.8% of the overall figures.
“It could save the Chancellor several billion pounds a year while still allowing him to claim he had kept ‘the spirit’ of the triple lock promise,” Webb said.
However, some experts have warned of the fate of retirees struggling with low incomes if the Chancellor abandons the triple lock promise.
Even the state pension was to increase by 8%, this would still leave an income gap of £ 730 per year against the Joseph Rowntree Foundation’s ‘minimum income standard’ of £ 10,816, according to a new analysis by the financial services company Just Group. .
“While an 8% increase in the state pension will seem extraordinarily generous, our analysis shows that even that level of increase would still not give single retirees an income that the public believes provides a standard of living. minimum acceptable, ”said Stephen Lowe, director at Just Group.
Twice as many women as men over 65 are single, widowed or divorced in England – 2.77 million women compared to 1.41 million men. And OECD figures estimate that women in the UK are, on average, likely to earn between 34 and 43% less in retirement than men.
Mr Lowe said: ‘There is already a substantial gender gap in retirement income in the UK – the removal of some of the protections around the state pension sends a message from the government that it is happy to risk even more damaging women’s bottom lines later in life. ”