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State pension triple-lock: will you be better or worse off?

See our video guide to the state pension and the party plans for its future

State pension triple-lock: will you be better or worse off?

Almost all of the UK’s political parties have published their manifestos and voters now have a clear idea of their positions on one of the key issues affecting their finances – the state pension, and what kind of pay rise pensioners can expect to get in the future. 

The state pension is currently increased every year by something called the ‘triple lock’. It currently guarantees that the basic state pension rises each year by either the rate of inflation (measured by the Consumer Price Index, or CPI), the increase in average earnings, or 2.5% – whichever is highest.

This has meant that people receiving the basic state pension are now more than £1,040 better off than in 2011. And while most of the parties have pledged to keep the triple-lock in place should they win, the Conservative party has plans to make a change – moving to a ‘double-lock’.

Here, we explain everything you need to know about the state pension triple-lock – and what its future might look like.

How is the state pension triple-lock calculated?

As we’ve mentioned, the state pension is currently increased by either inflation, earnings or 2.5%.

But inflation and earnings change all the time, so the government selects the rate from a particular month in the year to increase the state pension.

For inflation, it is the rate of change in CPI from the September of the year prior to the state pension being increased. So, for example, when the state pension was increased by 2.7% in April 2014, that was the rate of inflation in September 2013.

For earnings, it is the rate of change in the three-month average of weekly earnings from the July of the year prior to the state pension being increased. When the state pension increased by 2.9% in April 2016, that was the average earnings increase from July 2015.

If either of these rates are below 2.5%, the state pension is increased by 2.5%.

The table below shows which measure within the triple-lock has been the highest since it was introduced (highlighted in red).  In 2013-14, 2015-16 and 2017-18, low inflation and average earnings growth saw the 2.5% guarantee kick in.

Consumer Prices Index Average earnings 2.5%
April 2012 5.2% 2.7% 2.5%
April 2013 2.2% 1.5% 2.5%
April 2014 2.7% 1.2% 2.5%
April 2015 1.2% 0.6% 2.5%
April 2016 -0.1% 2.9% 2.5%
April 2017 1.0% 2.4% 2.5%

What parts of the state pension are increased by the triple lock?

The state pension has gone through some significant changes over the past few years.

Prior to April 2016, the state pension was made up of two amounts – the basic state pension and an additional state pension. If you qualified for it before April 2016, only the basic state pension you receive is increased by the triple lock.

If you get any additional state pension, that is increased by CPI alone. In April 2017, the additional state pension increased by 1%.

If you qualified for the state pension after 6 April 2016, you’re eligible for the new single-tier state pension, which is currently £159.55. The triple lock applies to this figure, but if you anything you earn above £159.55 from any additional state pension you built up, it is only increased by CPI.

State pension triple lock: the party pledges

Labour, the Liberal Democrats, Plaid Cymru and UKIP have all pledged in their manifestos to maintain the triple lock should they sweep to power.

The Conservative party, however, have proposed a change. In its manifesto, it claimed that by introducing the triple-lock as part of the 2010-2015 coalition government, pensioner poverty had reduced to historically low levels, and that the triple lock had ‘worked’.

The Conservatives have proposed keeping the triple-lock until 2020, and then subsequently moving to a double-lock, meaning that the state pension will rise in line with average earnings or in line with inflation – whichever is highest.

The Green party made no reference to the triple lock in its manifesto, while the SNP has yet to publish its manifesto.

What would a state pension double-lock look like?

Under the Conservative plan, pensioners can expect to get increases of at least 2.5% in April 2018, 2019 and 2020.

Assuming that was the case, recipients of the basic state pension could see their pay rise to:

  • £125.35 a week, or £6,518 a year, in 2018
  • £128.49 a week, or £6,681 a year, in 2019
  • £131.70 a week, or £6,848 a year, in 2020

People receiving the higher single tier state pension could see their pay rise to:

  • £163.54 a week, or £8,504 a year, in 2018
  • £167.63 a week, or £8,716 a year, in 2019
  • £171.82 a week, or £8,934 a year, in 2020

These figures could be higher, of course, if inflation or earnings are higher. CPI is currently 2.7% and is forecast to increase further throughout the year.

We do not know what will happen in the future. But in the past six years that the triple-lock has been in place, it has been increased three times by the 2.5% element. If a double lock had existed then, the state pension would have risen by 2.2% in 2013, 1.2% in 2015 and 2.4% in 2017.

Calls to change the triple lock

Prior to the announcement of the general election, there had been many calls to change the triple lock, citing its high cost.

The Department for Work and Pensions spent £68bn on the triple-lock in 2015/16, around 0.9% of GDP.

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.

Where can I find out more about the state pension?

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