The next Prime Minister, likely to be Andy Burnham, is facing growing calls from economic experts to scrap the state pension triple lock. The policy, which guarantees annual pension increases in line with the highest of inflation, wage growth, or 2.5%, has been deemed too expensive and unsustainable for the future.
Triple Lock Under Fire
The triple lock has boosted pensions by thousands of pounds in recent years, but a new report by the Resolution Foundation argues it is no longer justified. The report states that pensioner incomes have surged to the same level as working-age households, and the policy's cost is becoming untenable.
According to the Resolution Foundation, "The state pension triple lock has delivered real gains for pensioners since its introduction in 2012. But the case for boosting pensioner incomes over and above others has now run out, while the case for the triple lock as a way to deliver such a boost was always poor."
Pensioner Incomes Match Working-Age Households
The report highlights that pensioners have experienced three times as much living standards growth as non-pensioners over the last two decades. A typical pensioner household now has the same level of income as the typical working-age household, and pensioners are less likely to be in poverty than the rest of the population.
"There is not a strong case for continuing to increase state support for pensioners faster than the wages of typical workers – the inevitable practical effect of the triple lock," the report added.
Political Sensitivity
Despite the expert calls, Burnham recently ruled out any changes to the triple lock in an interview with the I Paper. Scrapping the policy would be politically explosive, but finance commentators argue that a future government will have to face the decision sooner or later.
Lily Megson-Harvey, policy director at My Pension Expert, responded to the report by emphasising the importance of the triple lock for pensioners' financial security. "The Resolution Foundation is right to raise questions about the long-term sustainability of the triple lock, but for millions of pensioners this is larger than academic debate, it's about financial security. Many retirees are currently grappling with rising living costs and uncertainty about how long their savings need to last. Scrapping the triple lock without a clear alternative risks undermining confidence in retirement planning when certainty is needed most."
