Triple lock warning as state pension lags behind earnings

State pension payments have failed to keep up with the growth in average earnings despite the triple lock policy, an expert has said.

The full new state pension of £203.85 a week is 31.3 percent of average total earnings, at £651 a week, but in April 2016 the full amount was £155.65 a week, which was 31.6 percent of average total earnings, at £493 a week.

Richard Parkin, head of Retirement at BNY Mellon Investment Management, told Express.co.uk: “The Government’s decision not to apply the earnings link in 2022 meant that the state pension has remained around a third of average regular pay since it was introduced in 2016.

“When we look at the state pension compared to total pay it has actually fallen slightly.”

This is despite pensioners getting a record 10.1 percent increase last year in line with high levels of inflation, which was above the rise in average earnings.

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Ministers opted to suspend the average earnings element of the triple lock the previous year because of a steep rise in earnings after the COVID-19 restrictions eased, with payments increasing just 3.1 percent.

The average earnings figure looks set to be the key metric for determining the state pension increase next year, which would boost payments by 8.5 percent.

But there have been reports the Government is looking at using the average earnings figure excluding bonuses next year, which would reduce the increase to 7.8 percent.

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Mr Parkin said: “If the Government does choose to not look at bonuses when increasing the state pension next year, we could see pensioners fall a little further behind the average worker.

“This isn’t a huge difference, but it does undermine the original purpose of the triple lock which was to ensure that, over time, the state pension grew compared to average earnings.”

The pensions expert said when the state pension goes up in line with average earnings this should “offset largely” by increased tax revenues on the higher earnings but there is another reason the policy may soon be unaffordable.

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Mr Parkin said: “The bigger issue for state pension affordability is that the number of pensioners is going up faster than the number of workers meaning the State Pension bill is growing faster than the tax take that pays for it.

“The Government has tried to address this by raising the state pension age but over time we’ll spend more of our national income on pensions than we do today.

“It’s still true that the Government could decide not to increase pensions and use the money elsewhere but that would mean pensioner incomes starting to fall relative to other workers.

“The state pension is still only a fraction of average earnings and most pensioners really need the extra income.”

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