The Triple Lock is a mechanism used by the Government to determine the annual rise in the State Retirement Pension, (commonly known as the ‘Old Age Pension’).
Under the triple lock the rate of inflation, the annual rise in earnings across the economy and 2.5% are compared, and the greater of these three figures determines the rise applied to pensions, meaning that the rise is never less than 2.5%.
The Tory Government have been unhappy with this formula for a while, as it regularly produces rises in excess of price inflation and annual earnings rises, and government spokespersons have raised the idea of scrapping the Triple Lock formula on a number of occasions. What has to be understood is that the State Retirement Pension in the UK is low, and is only 24.2% of National Average Earnings, normally it would take until 2038 to even reach 26% of national average earnings! (26% is the peak level, which was achieved as long ago as 1979).
But the situation is also complicated by the fact that people who retired before April 2016 receive a substantially lower pension than those retiring after that date. Our pension is also low by comparison with other similar countries, according to the Organisation for Economic Cooperation and Development, being around 29% of our working income, compared with the OECD average of 63%, whilst in Italy and the Netherlands the figure is more than 80%!
The Coronavirus crisis has created an unusual situation, because workers who were furloughed on 80% of their usual earnings, and who will return to their usual earnings when they return to work will statistically create a rise in earnings across the economy of around 18%, and this is panicking the Government because of the impact on the Triple Lock.
The National Pensioners Convention have called for urgent talks with the Government in an attempt to retain the Triple Lock, which we hope are successful, but the fundamental issue of bringing the UK pension up to a comparable level with similar countries is crucial, and if that takes a one off rise of 18% then so be it!
UNISON North West Region Retired Members Committee