The government’s state pension triple-lock is here to stay – until the next general election at least.
But how does the triple-lock work and what does it mean to someone drawing the pension?
Here’s a look at how the triple-lock impacts the state pension.
Guaranteed annual cost of living increases
The triple-lock is a simple principle – every year in September, the government looks at how the Consumer Price Index (CPI) and average wages have performed over the year.
If one has hit higher than 2.5%, then the state pension is increased by whichever has increased the most over the year.
If neither has passed 2.5%, the state pension is increased by that amount.
Because of the triple-lock, the state pension has risen by 56% over the past seven years, according to figures supplied by pension platform Hargreaves Lansdown.
Why is the future of triple-lock under discussion?
Politicians and young voters complain that the triple-lock is too expensive and unfair to the young.
As the population ages and more people claim the state pension for longer, the government must find more money to pay them.
The state pension costs 5.2% of GDP now, but this is set to rise to 6.7% by 2066.
When the pension started in 1948, workers retired at 65 years old but life expectancy was 64. Today live expectancy is 84 years old.
To set off the cost, the government has raised the state pension age for younger workers to 68 years old by 2046. A debate is going on calling for the age to be raised even higher.
The government has no money saved to pay the state pension, the funds come from national insurance contributions paid by current workers, but the workforce is shrinking as the number of pensioners grows.
Sooner or later, NI paid by workers will not cover the payments to pensioners, leaving the government with a financial black hole to plug.
Why not scrap the triple-lock?
The Tories want to do this and set a double-lock ditching the 2.5% guaranteed increase.
But the election manifesto promise was poorly received and the political alliance with the Democratic Unionist Party means they can’t as the DUP demanded the idea was scrapped if Prime Minister Theresa May wanted their support in Parliament.
She desperately needs their 10 votes, so has had to agree.
