What is the pensions triple lock?

18 June 2020, 10:47 | Updated: 18 June 2020, 10:52

Reports suggest the government are considering removing the triple lock pension promise. LBC explains what the triple lock is and why it's so important.

The increased spending because of the coronavirus pandemic has left Chancellor Rishi Sunak looking for areas to save money during the next Budget.

Reports suggest the government is considering removing the triple lock, despite it being a key manifesto promise in the 2019 General Election.

This is everything you need to know about the pension triple lock.

READ MORE: Dominic Raab denies plan to remove triple lock pension

What is a pension triple lock?

The triple lock guarantees that the basic state pension will rise annually by either a minimum of 2.5 per cent, the rate of inflation, or average earnings growth - whichever one of the three is the largest.

The guarantee was brought in by the coalition government in 2011 under David Cameron.

Before it was brought in, state pensions rose in line with the Retail Prices Index (RPI) measure of inflation, which was consistently lower than 2.5 per cent.

Why is it a good thing for pensioners?

The triple lock guarantee has seen pensioners' incomes grow at almost double the rate of the average worker, according to an assessment by the Institute of Fiscal Studies.

How much has this cost the government?

A report from the Government Actuary's Department said the guarantee cost the government an extra £6 billion a year in 2015-16, with pensioners earning the highest share of average earnings since April 1988.

Why would the government stop this?

The Conservatives pledged to keep the triple lock until 2024 as one of Boris Johnson's key manifesto during the run up to last year's general election.

However, reports suggest that Chancellor Rishi Sunak is reconsidering the pledge following increased spending over the coronavirus pandemic.

Previously, Theresa May was considering whether to change the policy to a double lock, but decided against it to avoid irritating Tory voters.

What's a 'double lock' guarantee?

The more affordable 'double lock' would remove the 2.5 per cent minimum annual rise.

That means the pensions would rise by whichever was largest out of the rate of inflation or average earnings growth.

What do the government say?

Foreign Secretary Dominic Raab insisted the government are not planning to remove the triple lock.

He said: "We'll keep all our manifesto commitments. We have no plans to touch the triple lock.

"Of course, I don't want to pre-empt the Chancellor's Budget."

Nick clarified whether the triple lock is safe and Mr Raab confirmed: "There's no plans to address that and we are staying true to our manifesto commitments."