The triple lock – the foundation of the state pension since 2010 has been put on hold.
Covid is to blame. Thanks to booming wages post-Covid, the pension triple lock would mean a record increase in state pension entitlements.
The lock, a government promise to increase the state pension every year by a minimum of 2.5%, in line with inflation, or in line with average earnings, would mean that pensioners could see their payments rise by as much as 8% from April 2022 and a record increase in the state pension to around £194 a week.
Unfortunately, it has been put on hold by the government.
The Department for Work and Pensions has confirmed the State Pension triple lock rule will not be applied for the 2022/23 financial year due to concerns about the potential costs involved.
At Continuum we are looking at the implications for you – and what you can do if your state pension is not going to be enough for the retirement you want.
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What has gone wrong with the triple lock?
The Exchequer is facing a huge deficit thanks to the Covid-19 pandemic. There is record debt which needs to be paid off at a time when tax revenues are down.
But now, post-Covid, wages are up. The big jump is caused by the drop in wages last year as jobs were cut and workers were furloughed, followed by a rebound as the economy reopened for business. Under the terms of the triple lock pensioners would receive a rise of as much as 8%, meaning an additional £3 billion burden on the exchequer.
No government wants to antagonise a huge and growing section of the electorate. The Chancellor has attempted to placate those who will not be getting the increase they had hoped for by assuring the country that the triple lock will be reinstated in 12 month’s time, ready for the 2023/24 tax year. But even if the triple lock returns, your pension will suffer because of the break.
What can you do?
The state pension may not be enough for a comfortable retirement, but it forms a key element in many people’s plans. Any shortfall can cause problems, but although getting paid less than you have bargained for is never pleasant, there are things that you can do to put your pension plans back on target.
First, make sure you are entitled to the full State Pension. You will need 35 years of NI contributions. You can check whether you have, and see your state pension forecast, here.
Second, look at your employer’s pension. Could you pay in more each month? It can be very cost effective to do so, especially in circumstances where it reduces your tax obligation, and where your employer will match your contribution.
Thirdly, look at a private pension plan. Thanks to tax relief every pound in your pension fund costs you much less than a pound to put in – helping ensure that a pension can be one of the best investments you could ever make. If you don’t already have one, it could be time to start – and if you do, it is certainly time to ensure it is working as hard as possible.
A pension review
We can review your current pension arrangements to help you make the most of your retirement. Call to book an appointment today.
It’s never too early to start your pension planning, but there are many questions that you will need answered. Getting those answers will be much easier with help from a Continuum Advisor.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable retirement strategy, you should seek independent financial advice before embarking on any course of action.