End of the triple lock?

I am trying to work out what the triple lock actually means in reality. When I work out how much my total state pension has increased its no where near 2.5%. Does it only apply to the basic state pension element but ignores SERPs and Graduated? My calculation would point that way. It could all be smoke and mirrors. 

David

For those that will be on the new state pension, will the triple-lock apply to the whole pension amount?

I am trying to work out what the triple lock actually means in reality. When I work out how much my total state pension has increased its no where near 2.5%. Does it only apply to the basic state pension element but ignores SERPs and Graduated? My calculation would point that way. It could all be smoke and mirrors. 

David

 

Only the basic bit David, the rest apparently has different rules.

Like you, mine has only gone up by a much smaller % overall.

Same with my company pension, only about half of it is covered by the link to inflation, which apparently was almost nil anyway.

The 2.5% guarantee (on top of inflation/cost of living) was introduced a few years ago to prevent the erosion of state pension spending power. It's only there to make sure that if things start to get more expensive you'll get a minimum 2.5% per year increase but if inflation is low it isn't needed. The guarantee bit is the safeguard against future rises in living costs and inflation, parts one and two of the triplelock, part three is the 2.5%....I think that's right? Pensions fell behind a few years ago and the 2.5% increases were made then to catch up. 

Mmmm...not quite right brue.  As I read it, the 2.5% is not on top of anything.

The basic pension is guaranteed to rise by inflation (at a certain date), or the rise in the average wage, or by 2.5%.......whichever is the highest.  So it will never rise by less than the 2.5%.

While inflation and general wage increases are low, it allows the pension to make up a little of the ground it lost further back.

Compared with other similar countries, the UK pension is low.  In Norway, for example, the basic pension is almost double that here, while living costs are 30-50% higher than here.

The existing manifesto committment extends to 2020 so there is a good chance the new incoming government will make any changes then.

By the way, no one told me that contracting out would affect my eventual basic state pension and neither was I offered any choice in the matter anyway.

Basic rule on state pensions - you are going to be disappointed!

One so called pension expert, who was explaining the cost of keeping the triple lock, also hinted that if the triple lock was kept in place, the government would have to make savings in other ways. Such as removing the recently introduced couples shared tax allowance.

Kj, I don't think I said the 2.5% was on top of anything, I said it was the third "part" of the triple lock which would guarantee the minimum if needed. 

If it's any help I've just checked the info about extra bits of pensions like SERPS and these are only linked to the Consumer Price Index so no increases this year.

For those that will be on the new state pension, will the triple-lock apply to the whole pension amount?

That's a very good question.

As the new state pension is, in effect, the new basic pension, then yes you would expect the triple lock to apply to all of it.

But a large percentage of people won't qualify for the full amount of the new state pension, due to the rules about contracted out / contracted in NI contributions.

If the amount that you would have got under the old rules (including additional state pension / SERPS etc) is more than you would get under the new state pension, you will get the higher amount.

But how much then is subject to the triple lock?

Hmm......I need to do some more research.......