The government has confirmed plans to remove the earnings link element from the state pension triple lock for 2022/23, after the impact of Covid-19 resulted in the measure becoming “skewed and distorted”.

In a statement to the House of Commons, Secretary of State for Work and Pensions, Thérèse Coffey, said that the one-year adjustment is needed in light of the “unique and exceptional events”, with the impact of the pandemic resulting in the earnings measure being a “statistical anomaly".

Coffey stated: “This year as restrictions have lifted and we experienced an irregular statistical spike in earnings over the operating review period, I'm clear that another one-year adjustment is needed.

“So tomorrow I will introduce the Social Security Uprating of Benefits Bill for 2022/23 only. It will ensure the basic and new state pensions increase by 2.5 per cent or in line with inflation, which is expected to be the highest figure this year.

“And as happened last year, it will again set aside the earnings element for 2022/23, before being restored for the remainder of this parliament.”

Coffey emphasised that the change to the triple lock is “temporary”, meaning that the government will apply the triple lock as usual from 2023/24.

“This will ensure pensioners spending power is preserved and protected from higher costs of living, but we'll also ensure that as we are having to make difficult decisions elsewhere across public spending, including freezing public sector pay, pensioners are not unfairly benefiting from a statistical anomaly,” she added.

Reports of a 'watered down’ triple lock had previously emerged amid growing pressure for the government to take action on the triple lock, after recent earnings growth figures from the Office for National Statistics raised questions over its affordability.

Furthermore, whilst official figures will not be published until later this month, Coffey confirmed that the government is expecting growth of "8 per cent or more" to July 2021.

“While the earnings growth is a welcome sign of the country's overall economic recovery, given the unique and exceptional events of the past 18 months, this year's measure is being skewed and distorted, reflecting a technical and temporary periods of reverting rebounding earnings, the different cohorts of people who retained or made redundant,” she said.

However, responding to the plans, Shadow Secretary of State for Work and Pensions, Jonathan Reynolds, critiqued the government for breaking its manifesto commitment, describing the changes as “more of a triple let-down, than a triple lock”.

He stated: “The triple lock and the issue indexation of the state pension is fundamentally about what the value of the state pension will be in future for working people today, when they retire.

“So I reject the presentation of this issue as a source of intergenerational tension or unfairness, because we all have an interest in ensuring there is a decent state of pension in future.

“The government's case, which is that the furlough data and the pandemic that produced a statistical aberration has to be considered by us, alongside the other decision made today which also breaks the promises in the Conservative manifesto.

"This decision isn't a one-off, but a significant repudiation of the basis upon which the government was elected, and it would be naïve to say otherwise."

Reynolds also called on the government to show the analysis that led to this decision and to explain, arguing that "we simply cannot take the government on its word alone".

"Will they explain why they couldn't assess the underlying levels of wage growth with the impact of furlough discounted? Will they publish the legal advice, cited as the basis for this decision?" he asked. "Only then could any opposition or any MP, make a decision on what is being proposed.

“I hope the Secretary of State appreciates that pensioners and workers as well as the opposition need fuller reassurance for any decision can be made on prospective legislation.”

Responding to Reynolds' statement, Coffey explained that whilst work has been done to look at different bits of earnings data, the DWP did not find it “necessarily reliable on what could be considered as substantial as substantiated at basis to make the change”.

“I'm not intending as usual to publish legal advice and the legal advice is quite straightforward,” she added. “If I was to summarise it is the best way to introduce this temporary set-aside is to do the legislation just as we did last year, so it's on that basis that I intend to take this forward.”

LCP partner, Steve Webb, commented that the decision “strikes the right balance” and labelled the government's commitment to return to the policy in future years as “very welcome”.

Aegon pensions director, Steven Cameron, also acknowledged that “some adjustment was inevitable and only fair” considering the “huge distortions” in national average earnings figures, while Pensions Management Institute director of policy and external affairs, Tim Middleton, highlighted the plans as “an acceptance of the inevitable”.

“Time will tell if the planned restoration of the earnings-related element will indeed actually happen,” he continued. “However, all those who remain passionate about pensions will remain committed to further development of our system to ensure that the retired are guaranteed a secure and comfortable lifestyle.”

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