Guy Opperman discusses the 'priority' for pension trustees

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The Chancellor is facing a dilemma over how to fill the massive hole in public finances 16 months after the Government’s furlough scheme was rolled out. The triple lock mechanism guarantees that the state pension increases in line with inflation, earnings or 2.5 percent – whichever is higher.

Data published yesterday by the Office for National Statistics (ONS) suggests earnings have increased by 6.6 percent.

But the body also published a new metric for “underlying” earnings data, which omitted the effects of the coronavirus pandemic.

This analysis showed earnings should increase by between 3.2 and 4.4 percent.

The data may afford Mr Sunak a doorway to raise pensions by a lower percentage without breaking the triple lock pledge.

In their manifesto for the 2019 general election, the Tories vowed to stick to the mechanism.

However, the Chancellor and the Prime Minister have recently signalled that there could be alterations to it this year.

A rise of 6.6 percent in the state pension would hand pensioners an extra £11.85 a week, £208 a year.

The state pension for 2021-22 stands at £179.60.

The increase would see it jump to £191.45 next April.

But if the Government opts for the lower increase of 4.4 percent, this would add just £8 per week.

Mr Sunak is faced with the challenging task of balancing the books while the economy recovers from a battering.

According to Sir Steve Webb, a former pensions minister, each percentage point increase in the pension adds £850million to the state pension bill.

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Sir Steve, who is a partner at consultants LCP (Lane Clark & Peacock), said the triple lock guarantee used to uprate pensions was not designed for average earnings being as volatile as they are currently.

Sir Steve said the triple lock was designed to give a “steady boost” to the value of the state pension.

He added: “But it was not designed for a period when average earnings figures are as volatile as at present.

“The Chancellor may well be tempted to use an ‘adjusted’ average earnings figure for the April 2022 uprating as this might ‘get him off the hook’ this time round.

“But if he does so he should also re-commit to a strategy of building up the value of the state pension thereafter.

“This is particularly important to growing numbers of women who have worked in the private sector, who may have very modest workplace pensions and are heavily dependent on the state pension.”

Last week the Chancellor said he recognises there are “concerns” over pensions in Britain.

He told BBC Breakfast: “I think they are completely legitimate and fair concerns to raise.

“We want to make sure the decisions we make and the systems we have are fair, both for pensioners and for taxpayers.”

Mr Johnson also echoed him, saying there would have to be “fairness for pensioners and the taxpayers”.

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