Former pensions minister Steve Webb said the ‘real test’ of the triple-lock will come in April 2022.
The government has committed to the state pension triple-lock for 2021 with an increase of 2.5%.
In a written statement published today, secretary of state for work and pensions Thérèse Coffey confirmed state pensions will be increased by 2.5% on 12 April 2021 in line with the government’s commitment to the triple-lock in its manifesto, taking the full rate of the new state pension to £179.60 per week.
Pension credit will also increase by the same cash amount as the basic state pension, rising by 1.9%.
‘The Social Security Act 2020 enables me to increase the basic and new state pensions and the standard minimum guarantee in pension credit by providing a discretion to increase them for one year, even though there has been no growth in earnings,’ Coffey said.
Steve Webb, partner at consultancy Lane Clark & Peacock (LCP) and former pensions minister, said this was ‘expected’ and that the ‘real test’ of this policy will come in April 2022, when the triple-lock formula ‘could easily imply an increase of 5% or more’.
‘At that point, [the government] may well decide to go for a “smoothed” approach, looking at the two years as a whole, to avoid a spike in pensions.’
Elsewhere in today’s Spending Review, the Office for Budget Responsibility (OBR) revised down the cost of the state pension this year by £600m, due to an increase of excess deaths.
The OBR said it expects excess deaths to reach 90,000 this year, up from its previous forecast of 62,000, with the increase due to a rise in Covid-19 infections.