Pension

The triple lock guarantee on pensions that was suspended for the current 2022-23 tax year is to be restored from April 2023. In September 2021, the government announced that its triple lock guarantee on pensions was to be abandoned for one year due to unprecedented fluctuations to earnings caused by the COVID-19 pandemic.

The triple lock guarantee was first introduced in 2010 and had remained in place until April 2022. The guarantee had seen the full yearly State Pension increase by over £2,050 in this period. The triple lock is the mechanism used to calculate increases to the state pension each year. Under the triple lock guarantees the basic state pension rises by whichever is the highest out of average earnings growth, inflation or 2.5%.

The confirmation that the government will reinstate the triple lock from April 2023 means that the state pension increase will be based on the reading of the consumer price index (CPI) for September 2022. Based on current forecasts this is likely to be significantly higher than the forecast inflation rate for 2023-24 and likely to be in the range of a 10% increase. 

The change was announced in Parliament by the Chief Secretary to the Treasury and remains subject to the Secretary of State’s review. This decision will bring some cheer to many of those in receipt of the State Pension especially following the changes this tax year and the inflationary pressures affecting the real value of their pension. 

The State Pension age is currently 66 and two further increases are set out in legislation: a gradual rise to 67 for those born on or after April 1960; and a gradual rise to 68 between 2044 and 2046 for those born on or after April 1977. 

In March 2016, John Cridland CBE, the former Director General of the Confederation of British Industry (CBI) was appointed by the government to lead an independent review of the state pension age. The review made a number of key recommendations including bringing forward the increase in the State Pension age to 68 over a two-year period starting in 2037 and ending in 2039.

The Department for Work and Pensions has previously confirmed that the Government intends to follow the recommendation made by the independent review to bring forward the State Pension age changes, seven years earlier than planned. The Pensions Act 2014 requires government to regularly review State Pension age, and in accordance with this law, the latest Review must be published by 7 May 2023.

These proposed changes will not affect anyone born before 5th April 1970. However, those born between 6 April 1970 and 5 April 1978 would see their State Pension age increase to between 67 and 68 depending on their date of birth. Those born after 6 April 1978 will see no change to their state pension age which was already set at 68. These changes will require new legislation following the next government State Pension age review.

The independent review also cited some interesting background information addressing the need for these increases to be based on increasing life expectancy and an ageing population. For example, '…. in 1917 King George V sent the first telegrams to those celebrating their 100th birthday. 24 were sent that year. In 2016 around 6,000 people will have received a card from Her Majesty the Queen. In 2050, we expect over 56,000 people to reach this milestone'.

Automatic enrolment for workplace pensions has helped many employees make provision for their retirement, with employers and government also contributing to make a larger pension pot.

The law states that employers must automatically enrol workers into a workplace pension if they are aged between 22 and State Pension Age and earn more than minimum earning threshold. The minimum threshold has remained fixed at £10,000 since 6 April 2014. The employee must also work in the UK and not be a member of a qualifying work pension scheme. Employees can opt-out of joining the pension scheme if they wish.

These rules apply if you directly employ a care worker to provide you with care and support, often called a personal assistant or a personal care assistant. It is important to note that you will be classed as an employer whether or not you pay using money provided by your local authority or the NHS in the form of direct payments or a personal budget to pay your personal care assistant, or if you use your own money.

The main exception to this rule is if the care worker is provided by an agency, and the agency pays the personal care assistant’s National Insurance contributions. If this is the case, then the agency will be responsible for the automatic enrolment requirements.