Boris Johnson has pledged not to ditch the “triple lock” on pensions, following press reports that the government was considering scrapping the commitment.
A spokesperson for the prime minister said that the promise to annually increase pensions by the highest of either the consumer price index (CPI), wage growth, or 2.5%, would stay in place.
“We are committed to the triple lock,” Downing Street said when questioned about the reports.
Average wages are currently elevated, in part due to anomalies created by the pandemic, growing by an annual 5.6% between January and March. Economists project that wage growth will rise to around 8% by July.
This means the government is now on the hook for an extra £4bn annual cost for future pensions, leading some senior government officials to suggest a year-long suspension of the promise.
The commitment to increase pensions was first introduced in the Conservative government’s manifesto of pledges ahead of the 2019 election.
But according to recent reports, the Treasury is drawing up plans to raid pensions to pay for spending during the pandemic, potentially placing Mr Johnson and Chancellor Rishi Sunak at odds.
One alternative being considered is a change to the way that earnings growth is defined, to account for the current distortions in the numbers.
Another proposal reportedly under consideration is to cut the pensions lifetime allowance from £1,073,100 to around £800,000.
The prime minister’s spokesperson also ruled out changes to the income tax rate on Monday afternoon.
“There was a promise made at the election that we would not raise rates of income tax and when we stand by that,” he said.