There’s been much talk about the Pension Triple Lock of late, but what is it and how might it affect us in the future?
Triple Lock was put in place by the government in 2010. It was an initiative aimed at protecting state pensions from diminishing over time by raising it yearly by a minimum of either 2.5%, the rate of inflation, or the average earnings growth, whichever is higher.
Triple Lock has so far served pensioners well. According to the Institute for Fiscal Studies, “between April 2016, the value of the state pension has been increased by 22.2%, compared to growth in earnings of 7.6% and growth in prices of 12.3% over the same period.”
In 2001 pensioners were earning over £100 less than the average worker. Lately, this lead has been considerably diminished. In 2016, reports showed that pensioners were bouncing back by narrowing that gap to just £30 less per week.
In an aim to cut back on costs, Teresa May has been considering replacing the Triple Lock with the Double Lock by 2020. In essence, it means that the lovely 2.5% minimum guarantee that is responsible for the pension earnings boom, would be cut. Any pension raises under Double Lock would come solely from inflation or average earning increases. On top of that, the government is hoping to raise the retirement age to 70 by 2050.
Andrew Colyer-Worsell, senior pension adviser from Fix My Pension, said, “ It’s clear that, in light of the uncertain future in this country, no one should pin their financial hopes to the State Pension anymore. It’s time to stop burying our heads in the sand and start planning for retirement ourselves. Having a personal pension not only gives you control over the amount you earn but also allows you to decide at what age you want to retire. It’s never too late to start saving towards a pension.”