The Triple Lock Values 2023/24
The Triple Lock means that the basic State Pension (bSP) and new State Pension (nSP) will increase by the higher of:?
Note that uprating also applies to other payments such as the Personal Independence Payment, Disability Living Allowance, Attendance Allowance and the standard minimum guarantee element of Pension Credit, some of which are uprated according to earnings inflation, others with prices inflation.?
There are also other benefits that are uprated ‘at the Secretary of State’s discretion’.? These include, for example, the personal or standard allowances of Universal Credit, Income Support and Housing Benefit.
The focus of this article is on the Triple Lock for State Pension!
I have read much recently with various people predicting the value of next year’s State Pension increases based on figures that are already known.? I found this strange and questioned my own understanding.
Here is my analysis:
In December 2019, pre-pandemic, pre-Ukraine’s war and pre-cost of living crisis, the Conservative Party were probably comfortable making their Manifesto pledge:
There is no legislative requirement for a Triple Lock, as The Social Security Administration Act 1992 (and Northern Ireland equivalent) only requires The Secretary of State to increase pensions in line with a review of the general level of earnings over a review period.? If the level of earnings is higher at the end of the period than at the start, an Uprating Order must be made to match earnings inflation.
There is no legislative requirement to increase by the value of CPI inflation or 2.5% - this is a political decision.
However, give the political decision to maintain the Triple Lock, things have been different in recent years with fluctuating earnings and inflation, for example:
2021/2022
The State Pension increased by 2.5% requiring a legislative intervention, when earnings inflation was negative and CPI inflation was 0.5%.? There was no requirement for this 2.5% increase, as earnings inflation had not increased.?
Yet, the political decision to keep a Triple Lock meant that legislation was required.
2022/2023
The State Pension increase by a ‘Double Lock’, with legislation made to ignore the requirement to look at the rate of earnings inflation for one year only, hence...
2023/2024
Saw the return of the Triple Lock when the State Pension increased by the value of CPI inflation (10.1%).
There are three factors that decide the value of the State Pension increase, as politically-decided by the Triple Lock.? I detail these and when we can expect to know this information:
There is no statutory definition of earnings inflation only that the Secretary of State ‘shall estimate the general level of earnings in such manner as he sees fit.’ Convention has indicated the Government compared the Nominal Average Weekly Earnings (AWE) from the Office for National Statistics (ONS) for the three months to July in one year and compared it to the following year (i.e. for the rates in 2024, looking at May to July 2022 compared to May to July 2023).??
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On 15 August 2023, the ONS published average weekly earnings for the period April to June 2023.? This stood at 7.8%, i.e. earnings were 7.8% higher in this quarter than the comparable quarter the year before. Bonuses received are excluded from this average increase figure.
However, we are looking for the average weekly earnings for the period May to July 2023.? This is set to be published on 15 September 2023.
On 16 August 2023, the ONS published the CPI rate for July 2023, i.e. the increase in costs in the 12 months to July 2023.? Note we are looking at the CPI rate, not CPIH (the Consumer Prices Index including owner occupiers' housing costs) or Core CPI (the Consumer Prices Index excluding energy, food, alcohol and tobacco).
We are looking for the CPI rate in the year to September 2023.? This is set to be published on 18 October 2023.
We know this value!
Set your watches because, now, we do not have all the information we need to be able to predict the rate State Pensions should increase in April 2024 if the Triple Lock is maintained.?
We need to be looking for two values:
The average earnings inflation is where some analysts predict this will be higher than the rate of CPI inflation.
The value of the State Pension will be confirmed at this year’s next ‘fiscal event’, probably the Autumn Statement. Some tabloid newspapers may make predictions, though.
It’s always interesting to look at the operation of the Triple Lock over the last few years showing the increases that have applied, highlighting the factor that was used (i.e. earnings, CPI or the 2.5% Lock):