A report by the Government Actuary published on 17 January shows that the Government could have kept the triple lock and increased the state pension by 8.3% in April without serious damage to the National Insurance Fund in the next five years.
Figures in the report show that if the Government had raised the basic and new state pensions by 8.3% in line with earnings instead of prices the surplus in the National Insurance Fund would still have been more than £50 billion in 2022/23 and remained above £50 billion in 2026/27. That is more than double the surplus needed by the Fund to operate safely.
The Government Actuary publishes a report each year into the cost of uprating benefits in April. It calculates the effect on the National Insurance Fund of the uprating and the surplus left in the Fund at the end of each tax year until 2026/27. This year's uprating in April 2022 will raise the state pension and other benefits by 3.1%. But the Actuary also looked at the effect of raising the basic and new state pension in line with earnings which had grown by 8.3%.
Under the triple lock promise in the Conservative Manifesto the basic and new state pensions are increased by the rise in prices or earnings whichever is higher, There is a minimum increase of 2.5% if both are below that figure. In October 2021 official statistics showed that prices rose by 3.1% in September and earnings by 8.3% in May to July. Those are the figurs used to uprate benefits and pensions the following April.
Under the triple lock promise in the Conservative Manifesto the earnings figure of 8.3% should have been used to increase the basic and new state pensions in April 2022. Instead the Govenment passed a law so that the state pension rose in April in line with the 3.1% rise in prices not the 8.3% increase in wages. That decision was criticised at the time and that has grown now the Bank of England predicts price inflation to be 7.25% in April.
The Actuary's report reveals that under the Govenment's plans the surplus in the National Insurance Fund will grow steadily over the next five years from £42.5 billion in 2020/21 to £60.4 billion in 2022/23 reaching £76.2 billion in 2026/27. That will be more than three times the surplus needed to safely operate the Fund without the Teasury stepping in with a grant.
In separate calculations the Actuary finds that if the triple lock promise had been kept the surplus in the Fund would be £25.4 billion lower in 2026/27 - which my calculations show would leave a surplus of £50.8 billion and represent 36.5% of benefit expenditure that year.
The Actuary's rule is that a surplus of 16.7% is needed to operate the Fund without the need for a Treasury grant. So on these figures the surplus under the triple lock would still be more than double the required level.
The Department for Work and Pensions told me
"The
one-year move to temporarily suspend the Triple Lock ensures fairness for both
pensioners and taxpayers...The new legislation is a one-year response to exceptional
circumstances of the pandemic and we plan to return the earnings element of the
Triple Lock next year."
All figures rounded.
Paul Lewis
15 February 2022
version 1.01
