With a snap general election announced for 8 June, uncertainty hangs over the future of the state pension – and how much it rise will every year.
Since 2010, pensioners have enjoyed healthy state pension pay rises thanks to the ‘triple-lock – the calculation used to increase the weekly rate.
However, a government-commissioned review state pension recently recommended that the ‘triple lock’ be abolished. And while the current Conservative government has pledged to keep the triple lock in place until 2020, it is not yet known whether its manifesto for the upcoming election will stick to that commitment.
Meanwhile, Labour has promised to maintain with the triple lock until at least 2025 if it wins the general election.
Find out more: state pension explained – our video guide explains how much you might get
The end of the triple lock?
The triple-lock policy, brought into effect in June 2010, guarantees that the basic and single-tier state pension rises each year by either the rate of inflation (measured by the consumer prices index, or CPI), the increase in average earnings, or 2.5% – whichever is highest.
This policy has cause the basic state pension to soar by 25% since 2010. It has risen from £97.65 in 2010-11 to £122.30 in 2017-18.
But it is costly – the Department for Work and Pensions spent £68bn on the triple-lock in 2015/16.
John Cridland, former director general of the CBI, was asked to conduct a wholesale review of the state pension age last year.
His report suggested that the triple-lock should end, and that the increase in the state pension should be tied to earnings only, thereby abolishing the link to inflation and the 2.5% guarantee, and creating a new ‘single lock’ alternative.
In years where average earnings growth is low, the state pension increase would therefore be similarly modest.
The government is due to respond to Mr Cridland’s proposals in the coming weeks.
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State pension age to rise faster than expected?
The Cridland report also recommended that the state pension age should rise to 68 between 2037 and 2039 instead of between 2044 and 2046.
This is another way to offset the cost of an increasingly generous state pension, but would mean that anyone under the age of 45 wouldn’t qualify until they were at least 68 years old.
We are awaiting the state pension positions of other political parties.
Find out more: state pension age calculator – find out when you’ll qualify