A slump in earnings this summer due to the coronavirus crisis could mean a zero increase in pension payments from next April under the current Whitehall formula for calculating benefits. To avoid that outcome, Work and Pensions Secretary Therese Coffey is to introduce a technical Bill into the Commons today designed to prepare the way for a pension rise of at least 2.5%.
She said last night: “The Government has worked hard to protect all age groups during the pandemic, strengthening the welfare safety net, introducing furlough and income protection schemes, as well as supporting those who have lost their jobs back into work.
“It is only right, then, that we also ensure pensioners can see their incomes protected as we build back better.
“In these difficult times, I want to give pensioners peace of mind about their financial health.”
Under the Government’s triple-lock pledge, the state pension rises each year by the highest increase out of average earnings, consumer prices or a minimum of 2.5%.
Her move comes in spite of speculation that the pension triple-lock could be temporarily suspended or even scrapped to help the Treasury claw back cash after the billions spent bailing out businesses in the pandemic.
Chancellor Rishi Sunak is understood to be pressing Boris Johnson to allow him to abandon the Tory manifesto pledge in his next Budget.
Ms Coffey will undertake a review of social security rates shortly, and will report to Parliament on the outcome of the review in November.
Ms Coffey’s Bill will also allow the Government to increase Pension Credit and payments under the Industrial Death Benefit scheme.
Official wage growth data for May to July this year have yet to be published but initial forecasts have pointed towards a drop over the period.
Office for National Statistics data showed average weekly earnings fell by 1.2% during May.
Mr Sunak is looking at a range of measures to try to increase Treasury revenue given the huge pressures on Britain’s public finances.
The Government has spent more than £190billion on emergency coronavirus measures, ending this year’s Treasury deficit soaring to around £350billion.
Rises in corporation tax and capital gains tax are also thought to be under consideration along with a squeeze on benefits and public-sector pay.