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State pension payments have failed to keep up with the growth in average earnings despite the triple lock policy, an expert has said.<\/p>\n
The full new state pension of \u00a3203.85 a week is 31.3 percent of average total earnings, at \u00a3651 a week, but in April 2016 the full amount was \u00a3155.65 a week, which was 31.6 percent of average total earnings, at \u00a3493 a week.<\/p>\n
Richard Parkin, head of Retirement at BNY Mellon Investment Management, told Express.co.uk: \u201cThe Government\u2019s 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.<\/p>\n
\u201cWhen we look at the state pension compared to total pay it has actually fallen slightly.\u201d<\/p>\n
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.<\/p>\n
READ MORE <\/strong> Pensioners excluded from top savings account as they don’t have internet<\/strong><\/p>\n 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.<\/p>\n 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.<\/p>\n 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.<\/p>\n Don’t miss… <\/strong> Mr Parkin said: \u201cIf 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.<\/p>\n \u201cThis isn\u2019t 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.\u201d<\/p>\n The pensions expert said when the state pension goes up in line with average earnings this should \u201coffset largely\u201d by increased tax revenues on the higher earnings but there is another reason the policy may soon be unaffordable.<\/p>\n We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info<\/p>\n Mr Parkin said: \u201cThe 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.<\/p>\n \u201cThe Government has tried to address this by raising the state pension age but over time we\u2019ll spend more of our national income on pensions than we do today.<\/p>\n \u201cIt\u2019s 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.<\/p>\n \u201cThe state pension is still only a fraction of average earnings and most pensioners really need the extra income.\u201d<\/p>\n For the latest personal finance news, follow us on Twitter at @ExpressMoney_.<\/b><\/p>\n
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