Locks for pensions

The Triple Lock has become the Double Lock – What does it mean for pensioners?

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On 2 November, the House of Lords voted on an amendment to the Social Security Bill to keep the earnings link of the ‘triple lock’ in place next year. The earnings element of the ‘triple lock’ had been suspended by the government for 2022-23 following a higher rise in wage inflation due to the pandemic. However, when brought back to the House of Commons MP’s rejected the move by 300 votes to 229.

The ‘triple lock’ ensured that state pension benefits rise by the highest measure of price inflation, earnings growth or 2.5%. Linking it to earnings growth could therefore have seen a rise of 8%. As a result of the suspension of the ‘triple lock’ the state pension will rise by 3.1% per cent next April. Interestingly the inflation rate is already forecast to average 4% next year, so how will this lower increase in the stage pension from April affect your finances and standard of living?

Of course, there is the real danger that the triple lock could now further be diluted depending on the state of the country’s finances in the future. If this was the happen the value of the state pension could be eroded further as a result. Therefore it is more important than ever to have control of your retirement by planning as early as possible and to keep it under review as you move through different life stages. As someone moves in to their 50’s for example, at this age, retirement is no longer a distant concept, and time is short if your plans aren’t on track.

However, the value of the state pension should not be overlooked as this forms a critical part of a retirement income for nearly all retired households. For those entitled to the full state pension, you currently receive a sum of £179.60 a week, or just over £9,339 a year. For a retired couple, two state pensions would therefore provide the household with over £18,678 of risk free income each year. The full flat rate will rise in April by £5.55 to £185.15 per week, or around £9,630 a year.

"It is more important than ever to have control of your retirement by planning as early as possible and to keep it under review as you move through different life changes"

For many this will allow them to cover a good proportion of their expenditure, with any additional income requirements usually being generated from personal pensions, investments or maybe from a rental property. The Pensions and Lifetime Savings Association, in their Retirement Living Standards research, found that for a couple to retire on a “Moderate” standard of living (Outside of London), a household income of £30,600 a year would be needed. For a single person, or for someone who may have been widowed, this sum is £20,800 a year.

For many people the state pension will form the backbone of their retirement plans but if the value of the state pension is eroded then it is vital you have prepared in other ways such as contributing to a personal pension to build up a retirement fund. By arranging a full financial plan, that is regularly reviewed, you can be then assured that you are more likely to have the type of retirement you want to enjoy.

At Armstrong Watson our quest is to help our clients achieve prosperity, a secure future and peace of mind. We can provide a full review of your pension arrangements, with our compliments in the first instance, to help you to understand, based on your individual circumstances and arrangements, the position with regards to your current pension plans and whether this is an area you need to consider.


If you'd like to learn more about our pensions or retirement planning visit our pension pages or get in touch with martyn.pottage@armstrongwatson.co.uk

Pensions and retirement planning

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