The UK will not raise state retirement pensions in line with wages next year, but will instead increase them by the rate of inflation or 2.5 per cent, whichever is higher, work and pensions Minister Therese Coffey has confirmed.
Ms Coffey told parliament she will introduce legislation to temporarily override the formula which would have seen state pensions rise by 8% or more next year, due to what she called an “irregular statistical spike” in earnings caused by the Covid-19 pandemic.
“For 2022-23 it will ensure the basic and new state pensions increase by 2.5% or in line with inflation, which is expected to be the higher figure this year,” she said.
The triple lock would return from 2023-24, she added.
Prime Minister Boris Johnson promised in December 2019 election campaign to keep the triple-lock on state pensions which would rise by the highest of earnings, inflation or 2.5%.
The promise did not specify what measure of wage growth would be used, but the one which has been used in the past – average weekly earnings published by the Office for National Statistics – has been heavily distorted during the pandemic.
Average weekly earnings showed annual growth of 8.8% in the three months to June, but the underlying rate absent these distortions was more like 3.5%-4.9%, the ONS said last month.
Most workers who were on furlough a year ago are now back at work, and so are now receiving full pay rather than reduced furlough wages. Job losses were mostly among the lower paid – artificially boosting average pay levels among those remaining.
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