What is the Triple Lock Pension All About?

The triple lock was commissioned in 2011 by the coalition government. It guarantees that the basic state pension increases by a minimum of around 2.5% the average earnings growth or rate of inflation, whichever is the biggest. Before it was introduced, the state pension had risen similarly to the retail price index inflation measure. This was consistently lower than annual earnings rises or 2.5%. Its other aim is to keep clear of the small ad-hoc increases to the country's pension.

Instead, it offers pensioners reliability to their retirement. Retirement can prove to be a nervous time for anyone as you get to stop getting reliable monthly income and have to rely on the state to supplement your pension savings. It is, therefore, important to get reassured that the value of your income will not be worn down by inflation as this will reduce money worries before retirement.

Is This State Pension Guaranteed?

Just like any other pension initiative, this state pension costs the government huge amounts of money to honour. It adds almost £6 billion every year to the state pension's bill. This is according to the Government Actuary's Department.The triple lock pension has forced the government to look for another affordable alternative with some people suggesting that it should be reduced by getting rid of the link to either 2.5% or inflation.

If there is no link to inflation, the buying power of pensioner's income might take a hit especially if the rate of price growth passes the average 2.5% earnings. Although the government has promised to stop the introduction of the double lock by 2020, the UK pension system's life is still uncertain.

Has the Triple Lock Made Any Difference to the Pensioners' Incomes?

During the last number of years when the earnings growth had remained very weak, the triple lock indexation boosted the value of the state pension. This was relative to prices and average earnings. Between 2010 and 2016, the state pension's value went up by 22.2%. This was compared to the earnings growth of 7.6% and a 12.3% growth in prices over that same period. This means that pensioners' incomes have increased by almost double the rate of the average worker.

Why the Government Wants to Stop It?

The Conservatives promised to keep the triple lock in place until 2020 during their run-up to the 2015 general elections. However, the escalating cost means that this might not be the case. Theresa May and Philip Hammond may end up revising the policy in the manifesto of Tory. They will change it to a double lock that will be more affordable since it will remove the 2.5% minimum annual rise.

How much has It cost the Government?

According to the government's actuary's department, this dramatic improvement has managed to push the value of UK's basic state pension to its highest share since April 1988. When compared to an uprating together with earnings, increasing benefits to pensioners ended up costing the government £6 billion between 2015 and 2016. Since April 2011, it cost £4 billion relative to the indexation to the CPI (consumer prices index) measure of inflation.