State pensioners born before 1951 are on course to receive £57 less a week from the Department for Work and Pensions under a future Andy Burnham government. The Labour Party Prime Minister-in-waiting has confirmed the triple lock will be adhered to when he becomes PM.
The new MP for Makerfield has committed to keeping the triple lock, which bases state pension rises on three metrics, including a base level of 2.5 per cent. The full state pension is currently worth £241, and under a 2.5 per cent minimum increase, it would rise to £247. However, older pensioners on the basic rate receive only £184 as it stands, which would increase to £189.50 — £57.50 less per week than the full pension.
Triple lock under scrutiny
Mr Burnham has faced political pressure to scrap the triple lock, which guarantees annual increases for both the full state pension (for men born after 1951 and women after 1953) and the old basic state pension. The Institute for Fiscal Studies (IFS) has weighed in, stating: "While the triple lock has helped increase pensioner living standards over the last 15 years, a better approach is needed for the future."
The IFS recommends a more sustainable and predictable option: uprating the state pension in line with a ‘smoothed earnings link’, similar to Australia's approach. This would involve the government setting a target level for the new state pension as a share of median full-time earnings. In most years when the pension is at the target level and earnings grow in real terms, the pension would rise with average earnings growth.
Inflation protection proposed
But in years when inflation rises above average earnings growth, the state pension would instead rise in line with inflation. This inflation protection would continue as real earnings recover, allowing the pension to return to its target fraction of average earnings. The IFS added: "Together these features of the smoothed earnings link would mean that the state pension both keeps up with growing standards of living in the long run, while providing inflation protection in times of economic turmoil. This would provide greater predictability for both pensioners and policymakers."
While the government has committed to keeping the triple lock this parliament, the IFS suggests a sensible approach would be to move away from the triple lock after the next election.
