This article explains the current mechanism for deciding how much the State Pension will increase by each year including the triple lock.
The rules and policies related to increasing different elements of the State Pension are the subject of much comment and debate, but also very complicated and often misunderstood.
There are many different elements of the State Pension and the increases that apply varies between them.
For people who reached State Pension Age after April 2016, there is the new State Pension but there can also be additions to that in respect of protected additional entitlement under the old system or in relation to deferring drawing this pension benefit until after State Pension Age.
For people who reached State Pension Age before April 2016, there is the Basic State Pension and the Additional State Pension as well as increases in relation to deferring State Pension and interactions with private pension schemes.
What is the triple lock?
The triple lock is a high-profile policy that is meant to protect the incomes of pensioners.
It is called the triple lock because it provides for an increase that is the greatest of three elements – price inflation (measured by CPI), average earnings growth and 2.5%.
However, there are a couple of issues with the triple lock.
The first is that it only applies to the new State Pension and the Basic State Pension.
The second is that there is no statutory basis for the triple lock. It is a political commitment usually made in a party’s general election manifesto that applies for the duration of the subsequent Parliament. This means that the triple lock can be dropped without making any legislative changes.
The earnings leg of the triple lock was also dropped in 2022-23 due to issues with the calculation of average earnings growth being distorted by furlough schemes during lockdown.
In April 2024, the new State Pension has increased by 8.5% to £221.20 per week.
The statutory requirement for increasing the State Pension
The statutory requirement for increasing the new State Pension and the Basic State Pension is for them to increase at least in line with earnings and this would be the current default if the triple lock policy was not continued.
The statutory requirement for increasing other elements of the State Pension is for them to increase in line with price inflation (as measured by CPI).
Some people who reached State Pension Age before April 2016 might get additional increases as part of the increase to the private pension that can be payable by the Department of Work and Pensions along with their State Pension.