State pension UK: Britons warned to keep up to speed of any changes from Rishi Sunak | Personal Finance | Finance
The future of the triple lock is something many financial experts have expressed concerns about following the financial impact of the coronavirus pandemic. UK lockdown measures are still in place, impacting millions of people and their household finances.
“The policy, introduced 10 years ago, guarantees the state pension increases in line with the highest of average earnings, inflation or 2.5 percent.
“For 2021/22 that means a 2.5 percent increase in the flat-rate state pension from £175.20 a week to £179.60 a week.
“This promise comes at a price, however, with the OBR [Office for Budget Responsibility] estimating maintaining the triple lock would cost £6billion more than a straight CPI inflation lock and £3.2billion more than a lock to average earnings.
“Abandoning or watering down this manifesto pledge would undoubtedly be unpopular – particularly among older voters – although given the circumstances it could probably be justified.”
Salman Haqqi, personal finance expert at money.co.uk said: “In 2010, the UK government introduced a ‘triple lock’ for state pensions, in order to guarantee payments would not fall compared to either average earnings or prices.
“The third part of the triple lock ensured a rise of at least 2.5 percent if both earnings and prices rose by less than this – which is what happened this year.
“But a quirk in the current rules means that earnings could shoot up next year by more than 18 percent compared with their current levels, which include people on furlough and those who have lost work thanks to coronavirus.
“That has left people worried that this earnings element of the triple lock could be scrapped, or at very least changed, to prevent a massive increase in the cost of the state pension at a time government finances are already stretched.
“With the Spring Budget announcement just weeks away, it is essential that those relying on the state pension keep up to speed with any changes made by the chancellor, in order to safeguard their income.”
Mr Haqqi suggested various ways in which Britons could prepare for any potential changes.
“”The first thing you should do is work out a budget now, to know how much you have coming in and where it goes,” the personal finance expert exclusively told Express.co.uk.
“You might be able to save money by comparing insurance costs or switching to a cheaper gas, electricity or phone provider.
“The second is to check you’re not owed any benefits you’re not already claiming – such as Pension Credit, help with rent, heating costs, council tax reductions or even a missing pensions entitlement from a deceased partner.
“Finally, it might also be worth looking to see if you have any old workplace pensions schemes sitting idle, the Pension Tracing Service can help you track them down.
“The important thing is not to panic – tax and pension changes announced in the Budget will not come into effect until next year at the earliest. That means if you do your homework now, you will be in a far better position to meet them then.”
Mr Haqqi also explained how the current state pension system works, pointing out there are two types – the basic and the new state pension.
“Under current regulations, you will receive different amounts depending on whether you get the new state pension or the basic state pension,” he said.
“Which state pension you are eligible for is based on when you were born and when you retire.
“If you’re a man born before April 6, 1951 or a woman born before April 6, 1953, have been paying National Insurance for 30 years, and reach state pension age before April 6, 2016, you would get the full basic state pension of £134.25 a week.
“However, if you’re a man born after April 6, 1951 or a woman born on or after April 6, 1953, have been paying National Insurance for 35 years, and reach state pension age after April 6, 2016, then you’d receive the full new state pension of £175.20 a week.
“Currently, the triple lock on the state pensions means it will increase in line with inflation (or by 2.5 percent, whichever is higher).
“However given the ageing population in the UK, some believe this promise is unsustainable in the long term.
“With the Spring Budget announcement just weeks away, it is essential that those relying on a state pension keep up to speed with any changes made by the Chancellor, in order to safeguard their income.”