The UK’s Consumer Price Index rate of inflation has reached 2.7 per cent, the first time it has been above the triple lock’s 2.5 per cent rate since September 2013 making the policy an “attractive” commitment.
Since the beginning of the year CPI has been on the increase rising from 1.8 per cent in January to 2.7 per cent in April, with the Office for National Statistics citing airfares as the main contributor to the increase in the rate in April.
Increases to the state pension are set by the CPI rate for September but experts believe that a rate above 2.5 per cent is likely to continue past September. Royal London director of policy Steve Webb noted that with an increase of inflation above 2.5 per cent, the third element to the triple lock becomes irrelevant, making a commitment to keeping the triple lock more attractive.
“Politicians will be wary of announcing that they are downgrading pensioner support – for example, to a double lock – if it does not actually save them any money. It seems unlikely that inflation will have fallen sharply by September, which is the figure used to determine the annual uprating. If it stays persistently above the Bank of England target of 2 per cent this does mean that the cost of the triple lock over a five year parliament is likely to be very modest indeed,” Webb added.
Labour and the Liberal Democrats have already promised to keep the triple lock as part of their general election pledges, but the Conservative Party remains quiet on its stance. There has been speculation the Conservatives will scrap the policy following the report by independent state pension age reviewer Sir John Cridland, which recommended the policy be scrapped. However, recent research by Old Mutual Wealth found that scrapping the triple lock will put Conservative votes at risk.
Retirement Advantage pensions technical director Andrew Tully said: ‘You could argue that it is an easy political win to continue to promise the triple lock given the policy is cost neutral if the short-term forecasts for inflation come true. In effect if inflation continues above 2.5 per cent then we basically have a ‘double lock’ state pension of earnings or inflation.
“Longer term of course the Bank of England target of 2 per cent for inflation will put the cost of the triple lock firmly back in focus, and will no doubt generate a new debate about the intergenerational fairness of the current policy. The whole debate around the triple lock highlights the short termism of current pensions policy making. This all demonstrates that long term pension policy and short term political thinking aren't ideal bedfellows.”