The Triple Lock scheme sees a guaranteed pension rise each year
The Government has pledged to keep the state pension triple lock in place, despite mounting fears it could soon become unaffordable. Pensions Minister Torsten Bell insisted the guarantee that pensions rise each year by the highest of inflation, average wages, or 2.5% would remain “throughout this parliament,” even as Whitehall wrestles with a multibillion-pound fiscal shortfall ahead of the November Budget.
The minister, who is also Treasury secretary, told an event in London on Wednesday: “I always say that if you want to know what the government is doing, then you can read the manifesto, because it tells you, which is that the triple lock is staying for the course throughout this parliament.”
The full new state pension for those reaching state pension age after April 2016 rose to £230.25 a week in April, up 4.1% on the previous year. It is expected to rise by around 5% next April, taking the annual total from £11,973 to £12,572 in line with wage growth.
Last year, the pension cost £114.1 billion, and by 2029-30 it is projected to hit £149.3 billion, according to the Office for Budget Responsibility (OBR). Mr Bell, Labour MP for Swansea West since last year’s general election, previously ran the Resolution Foundation think tank.
There, he described the triple lock as a “messy tool” and suggested a closer tie to average earnings would offer more sustainable protection against spikes in inflation such as those seen in 2022 and 2023.
But on Wednesday he defended the manifesto commitment, saying: “We’re aiming to deliver adequate retirements for the vast majority of the population, and the state pension for the bottom two thirds is a very material part of their retirement income, it’s a bedrock. So a higher state pension relative to earnings is a very sensible thing to be aiming for, and the triple lock is delivering that and that’s why it’s in the manifesto and that’s exactly what we’re going to do.”
He warned that those retiring in 2050 are projected to have a retirement income 8% lower than today’s pensioners because private pension provision has shifted from guaranteed final-salary schemes to defined contribution schemes, where payouts depend on contributions and investment returns.
Calls to reform the triple lock are growing amid fears over how it will be funded. The OBR said the policy has already cost “about three times more than initially expected” due to volatile inflation and slower earnings growth. It estimates the triple lock will cost an extra £15.5 billion in 2029-30 compared with increases linked only to earnings.
State pension spending already accounts for 5% of GDP and is projected to rise to 7.7% by the early 2070s as the population ages, with just 2.7 working-age people supporting each pensioner, down from 3.4 today. Sir Steve Webb, the former pensions minister who introduced the triple lock, said scrapping it now would be politically and practically unfeasible.
He sold the Times: “Given that the triple lock was regularly used as a shield for the government over the row over winter fuel payments, it would be a massive U-turn for it to be dropped just a few months later. The cost of the triple lock is already baked into government spending plans for this parliament, and abolition actually saves relatively little in the short term.”
The Institute for Fiscal Studies has warned that the state pension age may need to rise to 74 by 2068 to keep the triple lock funded. Sir Steve added: “Getting rid of the triple lock would be more about saving money in decades to come, and given the government’s poll ratings, exchanging short-term unpopularity for long-term fiscal rectitude is unlikely to be an attractive option.”