What is the Triple Lock Pension?

Author:

Published:

Updated:

The triple lock is a security measure currently applied to the state pension, designed to guarantee that your retirement income doesn’t lag behind inflation.

The triple lock guarantees that your pension will increase each year according to the higher of earnings growth, price inflation or 2.5%.

What is the triple lock?

The triple lock pension is a security that safeguards your retirement income against inflation. It guarantees that each year, whatever of three factors – inflation, wages growth or 2.5 per cent – is highest at the time, your state pension will increase accordingly.

But the government has come under fire for scrapping it, breaching a manifesto promise and potentially pushing 700,000 people into poverty. Activists fear this move could spark a vote backlash among voters – especially older generations who are already struggling to make ends meet.

According to Therese Coffey, the triple lock would be suspended in 2022-23 due to wage growth being disrupted during the coronavirus pandemic (Covid-19). However, now that government has confirmed it will remain protected for another year.

How does it work?

The triple lock is a government commitment to increase your state pension each year in line with inflation, average earnings or 2.5% – whichever of these three is higher. This ensures that your income doesn’t get cut back by rising living expenses.

However, there may be times when the triple lock must be withdrawn or modified. This could occur if its cost becomes too much for taxpayers to bear or there is a lack of political will to keep it active.

Typically, the triple lock means your state pension will increase in accordance with September’s inflation figure or the higher of average earnings growth or 2.5%.

Your income should remain constant with the rising cost of living, however there may be times when it can be altered or withheld. In retirement, this could mean that your state pension does not cover enough to cover all your costs.

Many pensioners will be delighted by the news of a reinstated triple lock for next year, especially as rising inflation has left many struggling to keep up with their bills this year.

What is the impact of the triple lock on my pension?

The triple lock ensures your pension will increase annually in line with either inflation, average earnings growth or 2.5%. As inflation is an important factor when calculating how much a pension may be worth over time, making sure your income continues to increase accordingly is essential.

The triple lock guarantee was first implemented by the coalition government in 2011 and is included in Conservative Party’s manifesto for this Parliament.

However, there have been concerns that the triple lock has cost the government far more than anticipated. In 2021, for instance, state pension rises would have only been linked to average earnings growth had there been no triple lock implemented.

How can I make sure my retirement income keeps up with inflation?

One of the major worries for retirees is inflation, as it can significantly diminish their retirement savings and affect quality of life as well as ability to afford essentials.

Fortunately, there are several steps you can take to protect your retirement savings from inflation in retirement. The first is diversifying your portfolio and investing in investments that are expected to appreciate in value as prices rise.

Another way to safeguard your retirement income from inflation is by cutting expenses and paying off debt. Clearing away credit card debt, student loans and mortgage allows cash for living expenses.

Although it may be tempting to take on more short-term risk with your savings, consider how this risk fits with the needs of retirement. Furthermore, choose investments that provide a good rate of return while minimizing potential downside risks.

About the author

Notice:MobilityExtra.com is an information and guidance-only website. The information on the site is not tailored advice to each individual reader and, as such, does not constitute actionable legal advice nor actionable financial advice. All information, guidance or suggestions provided are intended to be general in nature. You should not rely on any of the information on the site in connection with the making of any personal decisions, and you should always do your own in-depth research first and speak to specialists.

By using this website, you accept that you use the information at your own risk, and we can’t accept liability for any action you take. You should also note that we do not provide financial advice or legal advice, and no content or articles on the site should be regarded as financial advice or legal advice. You should always do your own research before choosing any financial or legal product, so that you can be sure it is right for you and your specific circumstances.

We aim to provide helpful content, but we can’t guarantee that it is always correct. We try to provide the best information we can. However, we cannot guarantee we won’t make mistakes. We can also not guarantee that the information you read is up to date from a legal or financial perspective. So please note that you use the information on our site at your own risk. We advise that you read our information in conjunction with other sources. If you do find any errors, please email us at info@mobilityextra.com.

At times we work with third parties who act as affiliates or partners. We might receive a commission or payment from them if you were to engage with them directly. We do not also provide quotes, advise or sell products directly to consumers, nor are we a Financial Conduct Authority (FCA) Licensed Agent or Broker. This site is an information hub and the options expressed are our own and should not be considered as advice.

We always strongly recommend that you get professional advice when seeking support on any topic, particularly legal and/or financial advice. Further guidance on financial topics can be obtained from moneyhelper.org.uk. You can also find legal advisors through the Law Society website.

Latest posts

  • Stamp Duty Refund for Uninhabitable Property: Step-by-Step Guide and Form

    Overview of Stamp Duty Refunds for Uninhabitable Properties Stamp duty can add up to a substantial amount, often representing a major expense in the property purchasing process. However, discovering that the property is considered uninhabitable at the time of purchase can lead to potential relief through a stamp duty refund. This refund may amount to…

    Read more

  • Age Co Stairlifts and Homelifts UK

    Yes, Age Co offers a range of reliable and high-quality stairlifts and homelifts in the UK to meet the accessibility needs of individuals. Their products are designed to provide safe and convenient solutions for navigating different levels of a home. Age Co’s Stairlifts: Types and Benefits Age Co understands that not all homes are built…

    Read more

  • Handicare Stairlifts UK

    Handicare offers a range of stairlift models in the UK, including the Handicare 1100, Handicare 1000, and Handicare 950. Each model is designed to provide reliable and comfortable mobility assistance for individuals with different staircase configurations. Discovering Handicare Stairlifts in the UK Handicare has solidified its position as a premier provider of stairlifts in the…

    Read more