‘Fudge’ could be created around pensions triple lock, suggests former minister

Chancellor Rishi Sunak may end up ‘fudging’ the figures to scale back a multibillion-pound state pension hike, according to Sir Steve Webb.

A piggy bank (PA Wire)

The system used to increase state pensions could be “fudged” to scale back a multibillion-pound bill, according to a former pensions minister.

The pensions triple lock guarantees that the state pension increases in line with inflation, earnings or 2.5% – whichever is higher.

But with average earnings data showing a rise of 5.6%, and the Consumer Prices Index (CPI) measure of inflation hitting 2.1%, the process of setting a new state pension for April 2022 is likely to be expensive, said former pensions minister Sir Steve Webb

Sir Steve, who is now a partner at consultants LCP (Lane Clark & Peacock), suggested Chancellor Rishi Sunak may end up “fudging” the figures to scale back a multibillion-pound state pension hike.

There can be little doubt that the Chancellor will be looking for ways to 'fudge' the earnings figures

Sir Steve Webb

It is likely to be the earnings element of the triple lock which is the largest when the decision is made in the autumn on the state pension rate for April 2022, Sir Steve said.

The earnings data is artificially high because a year ago wages were depressed with many people being furloughed.

Sir Steve suggested the Chancellor could say he is sticking to the triple lock but measuring underlying earnings growth without the distortions.

Or he could apply the triple lock formula over a two-year period, which would mean that this year’s earnings surge would be partly offset by last year’s earnings fall.

Sir Steve said: “Even without the triple lock policy the Chancellor has a problem because the law requires him to link pensions to earnings growth as a minimum.

“Current earnings figures are soaring away and a simple link to earnings growth will result in a multibillion-pound bill.

“There can be little doubt that the Chancellor will be looking for ways to ‘fudge’ the earnings figures.”