Boris Johnson has signalled the government could break the “triple lock” pledge on pensions by saying there had to be “fairness for pensioners and for taxpayers”.
There have been calls for the prime minister to ditch his election manifesto promise to keep the triple lock following estimates that state pensions could rise by as much as 8%.
The triple lock sees the state pension rise each year in line with whichever is highest out of average earnings, prices, or 2.5%.
Due to COVID-related fluctuations in earnings growth, it has been estimated that pensioners could be in line for a large rise at a time when many workers have suffered lost earnings and Chancellor Rishi Sunak attempts to deal with the massive impact of the coronavirus crisis on the nation’s finances.
This is as a result of artificially high earnings growth this year when compared with a year ago when wages were depressed while many workers were furloughed.
Earlier this week, the Office for Budget Responsibility said Mr Sunak might have to stump up an extra £3bn a year if he sticks with the triple lock pledge.
Asked on Wednesday whether would be comfortable with ditching the Conservatives’ manifesto promise, the prime minister said: “I think we have got to have fairness for pensioners and for taxpayers.
“But you’ll have to wait and see what the chancellor comes up with.”
He echoed earlier comments from Mr Sunak himself, who told the BBC: “The triple lock is the government’s policy but I very much recognise people’s concerns.
“I think they are completely legitimate and fair concerns to raise.
“We want to make sure the decisions we make and the systems we have are fair, both for pensioners and for taxpayers.”
Mr Sunak said the government must “wait for the actual numbers to be finalised”, which he said are currently “speculation”, before looking at the policy “properly at the appropriate time”.
Tory former minister Lord Willetts, president of the Resolution Foundation think tank, added his voice to those calling for a rethink of how state pension rises are calculated.
“The COVID crisis has laid bare the design faults of the triple lock, with a severe jobs crisis last year inadvertently contributing to an unnecessary and unjustified 8% rise in the state pension next year,” he said.
“The chancellor should take the opportunity this autumn to replace the triple lock with a smoothed earnings link.
“This would mean the state pension would rise in line with the living standards of working age people – a change that would be fair to all generations.”