Currently the state pension increases in line with whichever of the three is highest: CPI inflation, average wage increase or 2.5 per cent.
Due to concerns that a large post-pandemic rise in average earnings would have meant pensions increasing by eight per cent, the government has decided to move to a double-lock for 2022/23.
This will mean state pensions will rise by either inflation or 2.5 per cent, whichever is highest, under a ‘double-lock’ next year.
On Monday night, MPs voted 300 to 229 against a House of Lords amendment to retain the triple lock next year.
She said: “On Monday [15 November 2021] my colleagues and I considered the Lords amendments to the Social Security (Up-Rating of Benefits) Bill which, following robust debate, is now entering its final stages in the parliamentary process before the bill becomes law.
“This Government Bill, with my full support, addresses the fact that the Covid-19 pandemic has caused a statistical anomaly in average earnings, meaning that we have needed to set aside earnings and for one year only move to a ‘double lock’. The end of furlough meant that many workers have gone from 80 per cent of their wage to their previous annual wage. Clearly this is not a wage rise. Yet, for the triple lock calculation, it would have shown an average earning increase of eight per cent.
“State pensions will rise next year by the higher of inflation or 2.5 per cent which ensures not only that pensioners are protected against the rising cost of living, but also that such a change is done fairly by taking into consideration the impact of the pandemic.
“It is likely that the inflation rate will be the measure to calculate the increase given it has been running at four per cent. Given the state of the country, most public sector workers will not receive a pay increase at all and those who pay National Insurance will be paying a higher rate for the NHS and social care, that is a fair compromise for this extraordinary year, I am sorry that there is not more money to pass on.
“I do understand that some of my constituents may be concerned about this bill and what it means for them financially. However, I do not believe our local pensioners would feel they should receive an eight per cent increase in pensions when their children and grandchildren have either lost their jobs or had their pay frozen.
“The triple lock will be fully reinstated in line with the manifesto that I proudly ran on which – alongside other measures like free bus passes and prescriptions and council tax reductions – ensures that both current and future pensioners will continue to be supported as much and as fairly as possible.”