The state pension triple lock is under fresh pressure as former pensions minister has revealed “every political party wants to get rid of it” but fears public backlash.
Marking its 15th anniversary, the pensions expert warned the popular policy has become one of the UK’s most expensive welfare commitments, costing taxpayers over £100billion.
The triple lock guarantees that state pensions rise by the highest of inflation, average earnings growth, or 2.5 per cent.
Sir Steve Webb, former Pensions Minister and partner at LCP, who oversaw the launch during the coalition Government between 2010 and 2015, told The i that “no one imagined” it would still be in place now.
He said: “But everyone is terrified to be the one to turn the switch off as they will be blamed.” He added that it was intended as a short-term solution, “as at the time we were making policies designed for the five-year lifespan of parliament”.
The policy is now estimated to cost the Government an extra £11billion a year compared with if pensions had increased in line with either prices or earnings between 2010 and 2023.
If left unchecked, the costs could balloon to up to £45bn by 2050,
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If left unchecked, the costs could balloon to up to £45billion by 2050, according to the Institute for Fiscal Studies (IFS). The triple lock has already cost more than £100billion in its lifetime.
Webb defends the triple lock against affordability concerns, asking: “Well, how come countries poorer than us in Europe can afford better pensions than us?”
“For me, it’s about priorities, and I think a decent income in retirement is a priority,” he added.
Many experts argue the triple lock is unsustainable, but Webb believes the state pension should provide a meaningful retirement income.
Cost is the main argument against having the triple lock, having so far cost more than £100billion in its lifetime. There are also concerns about clarity for retirement planning, as speculation over the policy’s future and pension age changes creates confusion.
Additionally, there are worries about intergenerational fairness, with younger people bearing the burden of paying for older people’s retirement. Any changes would take years to implement.
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Cost is the main argument against having the triple lock
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Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, warned that the growing cost of the state pension is falling on a shrinking working population.
“There have been calls for a more balanced approach,” she said.
She stressed the importance of long-term clarity, noting that “the state pension forms the backbone of people’s retirement income and people need certainty as to what they are going to get and when”.
Morrissey added that constant speculation about raising the state pension age and introducing means testing “undermines this certainty” and called for the triple lock to be reviewed as part of a wider assessment to ensure the system is sustainable.
Tom Selby, director of public policy at AJ Bell, said that while the triple lock has been successful and remains politically popular, its lack of direction is a concern.
“The aimless nature of the policy is problematic,” he said, “as is the fact politicians now blindly commit to it as though maintaining the triple lock means they are doing right by older people”.
He also criticised the way the triple lock is currently applied, explaining that using inflation or earnings at a specific point in time can lead to sharp and unpredictable pension increases.
“That created a significant cashflow drain on the Exchequer,” he said, “and is a risk the Treasury could mitigate by exploring smoothed earnings or inflation pegs over, say, a five-year cycle”.
The state pension forms the backbone of many people’s retirement income
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Webb, now a spokesperson for LCP, believes the triple lock could be scrapped or amended in the next parliament if Labour stays in power, as the party is less reliant on older voters. He suggests that dropping the Winter Fuel Allowance could soften the political blow by reducing dependence on the pensioner vote.
Webb says the triple lock has not yet achieved its goal, arguing the state pension should reach a third of average wages, up from around 25 per cent in 2022. “It’s not job done,” he said.
“The state pension should provide a substantial enough income to live on — we’re not there yet.” Once that goal is met, he believes it could revert to a single lock linked to average earnings.
Selby called for a “broad review of the state pension” to give people long-term certainty, warning that without it, policy will remain “an oath of allegiance to the hallowed triple lock”.
Jon Greer of Quilter proposed linking pensions to earnings, with temporary inflation-based rises when CPI exceeds wage growth. “This ensures that pensioners’ income doesn’t lose value during periods of high inflation,” he said.
Greer added that any change must be handled carefully, as the state pension is “a vital source of income for millions”.
