Many older pensioners will get just 1.7% on a large chunk of their state pension, leaving them out of pocket.
Campaigners have been called for a change in the system but so far no government has responded.
The Tories didn’t change it, and now it looks like Labour won’t either. Until somebody tackles this issue, many pensioners will feel like they’re getting a rough deal.
Under the triple lock, the state pension rises each year in line with earnings, inflation or 2.5%, whichever is highest. April’s increase is based on earnings, which rose fastest of the three last year at 4.1%.
This will lift the maximum new state pension from £11,502 to £11,973 a year, an increase of £471.
However, around nine million older pensioners who retired before April 6, 2016, are paid under a different scheme, known as the basic state pension.
This also increases in line with the triple lock, but there’s a little-known catch.
The new state pension is a single-tier payment and all of it is subject to the triple lock. How much you get purely depends on national insurance (NI) contributions.
The basic state pension is more complex.
From April, the basic state pension will rise by 4.1% in line with the triple lock. This will lift it from £8,814 to £9,175 a year, for those who get the maximum amount.
That’s £2,798 less than the full new state pension – an issue I’ve regularly written about.
However, millions of basic state pensioners earn additional state pension on top, primarily the state second pension (S2P) or state-earnings related pension scheme (Serps).
S2P and Serps do not rise in line with the triple lock. Instead, they rise with last September’s consumer price inflation (CPI) figure.
Last year, this wasn’t an issue. Inflation was higher than both earnings and 2.5%. So everybody got the same.
That’s not the case this year as CPI was below earnings. So instead of 4.1%, S2P and Serps will rise by a meagre 1.7%, in line with September’s CPI.
In a further blow, that was the lowest monthly figure of the year. By November, inflation had crept back up to 2.6%. It could top 3% next year.
So in real terms, April’s S2P and Serps hike is a pay cut.
Many pensioners in ‘contracted out’ occupational pension schemes will also receive smaller increases. As will those on Graduated Retirement Benefit.
Pensions campaigner Baroness Ros Altmann has been calling for the government to sort this out for years.
She said any pensioner in their mid-70s and older is not fully covered by the triple lock. “Much of their state pension comes from Serps or S2P and these parts only rise by CPI next year, so they’re losing out.”
This is a bugbear for many older pensioners, including Express.co.uk reader Kevin who contacted me last week asking to highlight this issue.
He told me: “I wrote to the Department for Work and Pensions (DWP) about this and they say these are earnings-related pensions and are subject to different rules. I say they’re state pensions and should be subject to the triple lock.”
It’s hard to argue against that but doubtless the DWP and Labour will. After all, changing the rules will cost them money.
So instead, older pensioners are the ones to lose out. Labour seems to be content with that situation. As were the Tories.
