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Debates on whether to end “the triple lock has become one of the thorniest questions in politics,” an expert has said. Recently, the issue was pushed into the limelight once again after Chancellor Rachel Reeves backed a review into raising the state pension age, arguing it is “right” to take another look at it.
Coming into force in 2011, the triple lock means that the state pension rises each year in line with either inflation, wage increases, or 2.5% – whichever is the highest. The Office for Budget Responsibility (OBR) says “the triple lock has cost around three times more than initial expectations” due to a growing number of people above the state pension age, as well as spending on the state pension steadily rising thanks to the triple lock. With the Institute for Fiscal Studies predicting that the triple lock could cost up to £40bn a year by 2050, Tom Selby, director of public policy at AJ Bell, says it isn’t a “case of if but when it is scrapped”.
Speaking to the Express Mr Selby says the Government would need to do one simple thing before axing the triple lock and that would be simply linking “the state pension to the highest of earnings or inflation”.
Currently, the state pension goes up each year by either 2.5%, inflation, or earnings growth – whichever is the highest figure.
He says: “Deciding when to end the triple lock has become one of the thorniest questions in politics.
“It isn’t a case of if but when it is scrapped, and before that the Government needs to set out the aim of the policy – namely how much it believes the state pension should be worth.
“Once you reach that point, it would make sense to ditch the 2.5% underpin and simply link the state pension to the highest of earnings or inflation.”
After a humiliating Government U-turn on winter fuel payments, Mr Selby said he will be “surprised” if the Government “grasps this particular nettle before the general election”.
The Government had faced increasing pressure to change course following backlash on the decision that stripped millions of the annual payment, worth up to £300, last winter.
In an effort to balance what was described as a £22 billion “black hole” in the public finances, the payment criteria were reduced to just state pensioners on means-tested benefits, such as Pension Credit.
“How much pensioners miss out depends on what you compare the triple lock to and what happens to earnings / inflation,” Mr Selby said.
“If one or the other is above 2.5%, you miss out on nothing, but if both are below 2.5% you don’t get that baked in real terms increase.”
Jon Greer, Quilter’s head of retirement policy, told the Express that if steps were made to axe the triple lock then the Government must be clear in their communication.
He said: “We would need a review on state pension vs median average salary and then agree the right level for state pension.
“The Government would have to be clear in the communication as historically communication hasn’t been great.
“Due to the UK’s ageing population, spending on pensions will increase significantly. There will be 25% more pensions in 2050.”
