For the duration of this Parliament, the current Government has committed to up-rate the basic State Pension (bSP) and new State Pension (nSP) in line with the ‘Triple Lock’, something that has never been put into legislation.
The Triple Lock means that the bSP and nSP will increase by the higher of:
- Earnings inflation
- Price inflation (as measured by September’s CPI), or
The question, therefore, is ‘what is earnings inflation’? The Social Security Administration Act 1992 (section 150A) in Great Britain requires The Secretary of State to increase pensions in line with a review of the general level of earnings over a review period. The Social Security Administration Act (Northern Ireland) Act 1992 (section 132A) says that Northern Ireland may make an Order corresponding with that made in Great Britain.
Yet, there is no statutory definition of earnings inflation, just that the Secretary of State ‘shall estimate the general level of earnings in such manner as he sees fit’. By convention, the Government has compared the Nominal Average Weekly Earnings (AWE) from the ONS for the 3 months to July in one year and compared it to the following year (i.e. May to July 2018 compared to May to July 2019). The ONS indicated that there had been a rise of 4% in this period.
With price inflation falling, it looks as though the Triple Lock will guarantee a large rise to the bSP, currently £129.20 per week and the nSP, currently £168.60 per week. These will be payable from the first Monday in the tax year 2020/21 which is 06 April 2020.
Of course, we will have to wait for September’s inflation figures to guarantee the 4% figure. This is due to be published mid-October 2019.
In any forthcoming General Election, I wonder if this increase will spark discussions about whether the Triple Lock is sustainable.