Treasury officials are understood to have looked at potential savings from scrapping the “triple lock” that guarantees payments to pensioners rise each year in line with either wages, inflation or 2.5%, depending which figure increases the most. But the Chancellor is said to have ruled out the move following talks with Boris Johnson.
A Downing Street source also denied a claim that the pair had clashed over the issue.
“The Prime Minister has got the interest of pensioners at heart. There isn’t a jot of difference between the Prime Minister and the Chancellor on this,” the source said.
The source went on to insist that the Government will not break the Tory general election manifesto promise to keep the triple-lock in place throughout the current parliamentary term.
Dennis Reed, of the Silver Voices pressure group for people aged over 60, said: “I’m pleased that the triple lock is going to stay.
“Pensioners have been concerned about noises from parts of the Government suggesting it could be abolished or paused.
“It would be a complete injustice if the triple-lock had been scrapped because the British state pension is already bottom of the league in Europe in terms of comparison with earnings.
“It is only right that the triple lock is maintained. This year’s rise was only a small increase but it still means a lot to pensioners who will be struggling through the pandemic and beyond.”
Jan Shortt, of the National Pensioners Convention, said: “The Government’s proposal to leave the triple lock in place for pensioners is welcome news.
“The National Pensioners Convention and other organisations working with older people did make a submission to the Chancellor of the Exchequer, Rishi Sunak and the Secretary of State for Work and Pensions, Therese Coffey on the damaging impact of changing or suspending the triple lock for 2021.
“The triple lock indexation provides the most adequate basic level of income for pensioners in the short term and longer term for those on the new pension scheme.
“Pensioner poverty is increasing, particularly for the over 75s. If the triple lock had been off the table, then we would see poverty in the pensioner population increase even more.”
One report yesterday claimed Mr Johnson had “put his foot down” and overruled the Chancellor on the issue.
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A source close to the Chancellor declined to comment on the claim.
Mr Sunak was said to have wanted to suspend the triple lock for several years to ease the pressure on the public finances after spending on supporting the economy has sent the Government Budget’s deficit soaring.
Some City experts are forecasting a sharp rise in average earnings yesterday after the Chancellor’s Job Retention Scheme winds down next month.
Researchers at the Resolution think tank estimated that the state pension could rise by 7.4% over the next two years due to expected average wage increases.
The hike would cost taxpayers an extra £2billion a year and raise a basic annual state pension from £6,981 to £7,497 over the period.
Such a rise in earnings could lead to an equally sharp increase in the state pension the following year if the triple lock remains in place.
Earlier this week, ministers introduced legislation into Parliament to ensure the state pension will not be frozen next year if wages fall this year due to the Covid crisis.
Work and Pensions Secretary Therese Coffey launched a technical bill to close a legal loophole that could prevent the Government linking next year’s rise to inflation or the 2.5% minimum figure instead.
Her Social Security (Up-Rating of Benefits) Bill is designed to ensure the Government can stick to the triple-lock pledge by overriding earlier legislations that stipulated state pension rises must be linked to average wage increases.