The government is introducing a bill to the House of Commons that aims to iron out a “technical detail” that could have prevented an increase in the state pension in April 2021.

Pensions Secretary Therese Coffey will introduce a technical bill that will allow the state pension to increase even if the UK sees negative earnings growth this year.

Coffey said: “The government has worked hard to protect all age groups during the pandemic, strengthening the welfare safety net, introducing furlough and income protection schemes, as well as supporting those who have lost their jobs back into work.

“It is only right, then, that we also ensure pensioners can see their incomes protected as we build back better. In these difficult times, I want to give pensioners peace of mind about their financial health.”

Aegon pensions director, Steven Cameron, said the new legislation would combat a “technical detail in the small print” which dictates that “if earnings growth is negative, state pensioners receive no increase, irrespective of price inflation, meaning the 2.5 per cent ‘underpin’ also falls away”.

He added: “This obscure technical detail has escaped the notice of pensions experts and had the government used this to justify no state pension increase next April, would have come as a shock to millions of state pensioners.”

The triple lock ensures that state pensions rise each April by whichever is highest out of earnings growth, inflation or 2.5 per cent.

Some commentators have signalled concerns that maintaining this after the effects of the Covid-19 pandemic could see the state pension increase significantly.

This is because the triple lock would guarantee a 2.5 per cent increase in 2021, but increases the following year could be far higher due to unprecedented earnings growth caused by the return of furloughed workers and people returning to employment in a potential post-pandemic economic recovery.

Quilter pensions expert, Ian Browne, explains: “There is a danger that guaranteeing a 2.5 per cent boost to the state pension is perceived to be intergenerationally unfair, given it will provide a considerable boost to pensioners’ income when many others are taking a cut in their pay, working less hours or have lost their jobs altogether.

“But even more contentious is the fact that once the furlough scheme ends later this year and if wages recover, in its current form the triple lock will provide an artificially large boost to state pension income in 2022/23 when we could be in the clasp of a deep recession and when the government is struggling to control the deficit.

“Once wages recover next year, average earnings growth is expected to bounce back to create a one-off spike in wage growth, estimated to be as high as 5 per cent. This will increase the full basic state pension to £7,513.30 a year in 2022/23 year, and the new style state pension to £9,805.07 a year.”

Browne said this would mean that the triple lock would “no longer provide a link between the real economy and increases in the state pension”, noting that the boost in state pension “will come at a time when real economy metrics including earnings, employment, growth and inflation are flat”.

Cameron stated that this might not yet be the “final twist in the tail of the triple lock saga” as the government might instead opt to “smooth earnings fluctuations caused by furlough over two years, which would present a fairer approach across generations”.

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