State pension triple lock guide and what it means for you

To ensure the state pension doesn’t lose value in real terms, the triple lock was introduced just over a decade ago to provide state pensioners with a pay rise every year in line with some form of inflation. The triple lock metric used to decide compares three different percentages – hence ‘triple’ lock – and the highest value determines how much the state pension will increase.While the metric is typically used every year, the triple lock saw a temporary suspension for the years 2022-23, following an abnormal rise in wage inflation (8.3 percent) compounded by the pandemic.According to the former Secretary of State for Work and Pensions, Therèse Coffey, a one-year adjustment to the triple lock was necessary to stop pensioners “unfairly benefiting from a statistical anomaly,” and the policy would be reintroduced next year. But with a new Prime Minister, cabinet, and inflationary pressures, uncertainty on whether this will remain prevails.READ MORE: Heating bill help of up to £600 on the way for state pensioners State pension triple lock explained – your expert guide (Image: GETTY)What is the triple lock?By honouring the triple lock, the highest percentage out of three different values is used to determine how much the state pension will increase.The three values include:InflationWage increases2.5 percent.The percentages used are taken from the rates recorded from September prior to the start of the new tax year and are confirmed in November.The rise then comes into effect from April 6 of the following year, however, eligible pensioners won’t typically see the change until the first Monday of the tax year.Who qualifies for the triple lock pension? The triple lock is used to determin how much the state pension increases every year (Image: EXPRESS)What does the triple lock mean for your money?If the triple lock is honoured in April 2023, it will see state pensions rise by the highest figure out of September 2022’s inflation rate, wage increases, or 2.5 percent.The latest Consumer Price Index (CPI) reported that inflation rates hit 10.1 percent in the year to September 2022, which far exceeds the other two metrics. This means the state pension would see an increase of 10.1 percent.According to investment company AJ Bell, the full-rate state pension would increase from £185.15 per week to £203.85 per week (£10,600.20 per year) from April next year.The basic state pension would rise from £141.85 per week to £156.20 per week (£8,122.40 per year).Is the triple lock coming back?Recently, there have been concerns surrounding the future of the triple lock as uncertainty grows on whether it will be too expensive to maintain during the current cost of living crisis. However, despite its suspension last year, Downing Street previously pledged to reinstate it in 2023 to support pensioners with rising costs.But, with inflation jumping back to its 40-year high of 10.1 percent, the Government has once again brought the policy back under review. Whether or not it will be reinstated is due to be announced in the Chancellor’s autumn statement on November 17.However, the fact it’s up for debate has stirred controversy, as statistics show that state pensioners already experience a shortfall in their income compared to expenses.According to Just Group’s data from 2021-22 (which doesn’t take into consideration this year’s energy and inflation pressures), an average single state pensioner experienced a shortfall of £2,093 to their income, while couples receiving the full state pension experienced a shortfall of £2,627.Stephen Lowe, group communications director at retirement specialist Just Group, said the data shows: ‘If the state pension was paid as a lump sum at the start of the year, the average spending single pensioner would have used up all that money, and be reliant on other sources of income such as pensions, savings and benefits.’This is why the Government’s commitment to the triple lock – the guarantee that the value of state pension will at least keep up with inflation – is so important for pensioners facing a bleak winter.’Tom Selby, head of retirement policy at AJ Bell, commented: ‘If the triple lock was meant to provide retirees with retirement income security and certainty, it is hard to argue that has been the case for the last two years.’Pensioners need clarity from the new Prime Minister over what the state pension is likely to rise by next year, so they have the certainty to plan ahead of a difficult winter.”Mr Selby continued: ‘The impact of the decision will be huge for retirees. Increasing the full flat-rate state pension in line with September’s 10.1 percent inflation figure would push it to £203.85 per week. If this element of the triple-lock is abandoned and average earnings growth of 5.5 percent is used instead, however, the figure will be £195.35 per week.’That equates to a £442 gap in income over the course of the year – an amount which could make a huge difference to older people struggling with rising energy bills.’Over the longer term, the Government needs to review the triple lock and decide exactly what it is trying to achieve. Currently, it provides real-term increases in the value of the state pension at random intervals, and it has become clear that there is a limit to the amount the Exchequer is willing to shell out on pensioner incomes.’If the Government really wants to increase the state pension, it should set out its case and a trajectory for reaching that goal.’