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Pensions are often considered the backbone of retirement security, and in the UK, the triple lock pension has been a significant assurance for pensioners. 

However, a new twist in the tale may affect the promised 8.5% increase for the coming year. The government is considering whether to include public sector bonuses in the earnings figure used to calculate the pension increase. 

If it decides not to, pensioners may see a smaller increase than anticipated. But what exactly is a triple lock pension, and how does this latest development affect you?

What is a Triple Lock Pension?

The triple lock pension is a mechanism that aims to protect the purchasing power of state pensions. 

Introduced in 2010, it guarantees that the state pension will increase annually by the higher of three variables: inflation, as measured by the Consumer Price Index (CPI); average earnings growth; or a minimum of 2.5%.

The idea behind the triple lock is to ensure that pensioners can maintain a reasonable standard of living, without being adversely affected by inflation or stagnating wages. The scheme has been lauded for protecting vulnerable groups who rely heavily on state pensions.

Possible Effects of the Government's Decision

So, what happens if the government decides not to include public sector bonuses in the earnings figure? 

Simply put, this would likely lower the average earnings growth rate used in the calculation, leading to a smaller pension increase. 

Given that the CPI for September 2023 and the 2.5% base rate are likely to be lower than the original 8.5% figure, the exclusion could be significant.

This might lead to certain pensioners missing out on approximately £75 annually, as opposed to benefiting from an 8.5% increase.

Such a decision could have a ripple effect on pensioners' financial planning. Those who rely solely on state pensions might find it challenging to cover their living expenses, especially with the rising cost of goods and services. 

This underscores the importance of considering alternative ways to protect your wealth and fund your retirement.

Alternatives to Pensions - Protect Your Wealth

While state pensions are a crucial part of retirement planning, they shouldn't be the only avenue you explore. Diversifying your retirement fund can provide additional security and potentially higher returns.

Low-risk Investments:

1. Government Bonds

These are essentially loans you give to the government in exchange for a promise of repayment with interest. They are considered one of the safest forms of investment because they are backed by the government's financial stability. 

Different types of government bonds come with varying maturity dates, from short-term Treasury bills to long-term Treasury bonds. The interest rates are generally lower compared to other investments but offer more security.

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2. Precious Metals

Investing in gold or silver isn't just a traditional practice; it's a proven strategy that has stood the test of time. These metals act as a store of value and can serve as a hedge against inflation and currency fluctuations. 

While they don't offer dividends or interest, their intrinsic value often rises in turbulent economic conditions, providing a safety net for investors.

3. Dividend-Paying Stocks

These are shares in companies known for their stability and history of paying out a portion of their earnings to shareholders. Companies like utility providers or consumer staples manufacturers often fall into this category. 

These stocks offer a two-fold advantage: potential for share price appreciation and a regular income stream through dividends. This dual benefit makes them a balanced choice for a diversified portfolio.

By taking a multifaceted approach to low-risk investments, you can achieve a balance of security and growth. 

Bonds provide the peace of mind, precious metals offer a safeguard against economic upheaval, and dividend-paying stocks allow for both capital growth and a consistent income. 

Combined, these options can serve as a robust foundation for your retirement fund.

Cutting-Edge Alternatives

1. Peer-to-Peer Lending

This digital age lending option provides a platform for connecting individual borrowers with individual lenders. It cuts out the middleman, like banks, allowing for potentially higher interest rates for lenders. However, the risk is that borrowers may default, so due diligence is crucial.

3. Real Estate Crowdfunding 

This is an excellent avenue for those who want to get into property investment but may not have the substantial capital usually required. Through crowdfunding platforms, you can invest in various property types and locations, diversifying your real estate portfolio with minimal initial outlay.

3. Cryptocurrency and Crypto Staking 

Beyond simply buying and holding, staking your cryptocurrencies can generate additional tokens over time. It's akin to earning interest on a savings account but in the digital currency realm. However, the crypto market's volatility means that gains can be wiped out quickly, so proceed with caution.

By considering these cutting-edge alternatives, you're opening doors to potentially higher returns while acknowledging and preparing for the associated risks. Always remember to do your research and possibly consult financial advisors before diving into these modern investment options.

Innovative Schemes:

1. Robo-Advisors

These tech-driven platforms have democratised investment advice, making it accessible even for those with limited financial knowledge. By employing algorithms and machine learning, they continually adapt to market conditions, optimising your portfolio for the best possible returns within your risk parameters.

2. ESG Investments 

Going beyond mere financial returns, ESG investments offer the dual benefit of ethical and monetary growth. By supporting companies committed to sustainability, social responsibility, and transparent governance, you're not just growing your wealth; you're contributing to positive societal change.

Incorporating these innovative schemes into your retirement planning offers a blend of modernity and responsibility, making your investment journey both rewarding and aligned with your values.

What it all means

The potential change in how the triple lock pension increase is calculated for 2024 is a wake-up call for pensioners to diversify their financial planning. 

Relying solely on state pensions can be precarious, especially when subject to government decisions and economic fluctuations. By exploring alternative low-risk investments and cutting-edge financial products, you can build a more robust and resilient retirement fund.

Whether you decide to stick to traditional assets like government bonds and precious metals or venture into newer avenues like cryptocurrency and peer-to-peer lending, the key is to be informed and cautious. 

Each investment avenue comes with its own set of risks and rewards, and it's crucial to understand them fully before diving in. With the right blend of old and new, you can safeguard your retirement and live it on your own terms.

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James Waller
Content Specialist
Updated on
September 13, 2023

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