Pensions experts have raised concerns that the triple lock could soon become unsustainable. The policy ensures the state pension goes up each April in line with the highest of the rise in average earnings, inflation or 2.5 percent. State pension rates are expected to increase 4.7 percent next year in line with the policy, using the earnings metric, lifting the full new state pension to over £12,500 a year.
Experts have previously warned the spiralling costs of the state pension could soon become too much for the Treasury to afford. Professor Joe Nellis, economic adviser at accountancy firm MHA, warned that the policy is fasting become unsustainable.
He said: “It isn’t realistic to maintain the triple lock without raising taxes or cutting elsewhere, but any changes to the triple lock will be a political landmine for this Government that they are unlikely to touch yet. Tax rises and spending cutting are the most likely options for balancing the books.
“However, the UK economy cannot afford annual pension rises at this level moving forward – and with an ageing population the financial burden will only get worse.”
He spoke about some of the alternatives the Government could look at, noting: “The triple lock could be modified by limiting increases to inflation only – the government could argue that this will maintain living standards. An inflation-only uprating system could be justified with potentially minimal political fall-out. This is probably the only realistic option if they were to make any changes right now.
“A means-tested or graduated pension scheme is probably politically impossible – more so for a Labour Government.” Labour has committed to the policy for the duration of this Parliament.
Chris Ball, CEO of wealth firm Hoxton Wealth, said that it would be a hugely unpopular move to scrap the triple lock. He said: “It is understood in political circles that the triple lock is an unsustainable measure applied to the state pension amount, yet, both the Conservatives and Labour have chosen to keep it in place.
“A high proportion of voters are people that have reached or are approaching retirement age, so removing the triple lock is an incredibly risky move for any part that wants to stay in power, so I don’t feel the Government would remove it.” He also said there could be legal risks in changing the policy.
Mr Ball said: “With the state pension being dependent on National Insurance contributions i.e. 35 years of National Insurance payments required for maximum and no state pension due if you have less than 10 years contributions, there could potentially be legal repercussions as people have effectively paid for something which they have been promised and then it would have been reduced or taken away.”
You typically need to pay 35 years of National Insurance contributions to get the full new state pension and 30 years’ worth to get the full basic amount.
Downing Street has said the Government is committed to the triple lock “for the entirety of this Parliament”. If kept to, that means the triple lock would stay until at least 2029.
