There are fears the ‘triple lock’ that protects annual state pension increases in the UK could be at risk because a newly appointed Governmment minister has previously expressed his desire to replace the system. The pension triple lock is a UK government policy designed to ensure that the State Pension rises each year to maintain its value relative to inflation, earnings, or a minimum standard. It was introduced in 2010 to protect pensioners from declining living standards.
Under the triple lock, the State Pension increases each year by the highest of:
- Inflation: Measured by the Consumer Prices Index (CPI) for the previous year.
- Average Earnings Growth: The percentage increase in average wages in the UK.
- A Guaranteed Minimum of 2.5%: If both inflation and earnings growth are below 2.5%, pensions still rise by this fixed amount.
This means that pensioners are guaranteed an annual increase in their State Pension, keeping it aligned with economic growth or rising costs of living.
The triple lock has been criticized for being expensive and unsustainable as the UK faces an aging population and increasing fiscal pressures. Some argue it places a disproportionate burden on younger taxpayers. There have been discussions about reforming or replacing the triple lock with a less costly mechanism, but it remains a politically sensitive issue.
And Labour’s new Pensions Minister Tprsten Bell has previously spoken about scrapping the system. When he was chief executive of think tank The Resolutin Foundation Mr Bell said the UK needs a more ‘sensible mechanism’ than the triple lock and said it is a ‘messy tool’. He said the system means pensions growing faster than other benefits.
According to GBN, in a 2020 report Bell and co-author Laura Gardiner said the triple-lock was not ‘sensible’ and said pension increases shoulod be linked to just increases in earnings.
Bell wrote: “The policy answers to these challenges are to replace the triple lock, and pay more attention to the contrast with working-age benefits. A minimal and temporary fix would be to operate the triple lock over the coming two years as a whole, so that the state pension would be likely to rise by five per cent (twice 2.5 per cent) over two years (given this should exceed two-year growth in earnings or prices).
“If the Government wants the state pension to continue to rise faster than earnings, it should in addition set a clear objective for the level of the state pension relative to pay – as it does for the National Living Wage – and supplement the ‘smoothed earnings link’ with a fixed additional annual rise until that target value is reached.”
By 2028–2029, the annual state pension bill is set to hit £158billion. Bell hpreviously wrote on X: “There is no possible justification — moral or economic — for treating pensions and working age benefits differently.”