The Department for Work and Pensions has been urged to consider scrapping a long-standing rule for state pensioners that has been in place for 15 years. Personal finance experts and think tanks are warning that the triple lock policy should be axed.
Triple Lock Policy Under Fire
Since 2011, the state pension has risen by the highest of three measures: inflation, wage growth, or 2.5 percent. However, critics argue that this policy has become unaffordable. According to research by the Intergenerational Foundation, raising the state pension by inflation instead of the triple lock could save £19 billion a year by 2035.
Pensioners are currently £1,300 a year better off than they would have been if the state pension had only risen in line with inflation over the past decade. Yet, the Institute for Fiscal Studies (IFS) forecasts that the triple lock will be £10 billion more expensive a year than initially projected.
Proposed Changes and Savings
The Intergenerational Foundation is calling for the state pension to increase with inflation until 2030-31, then by the average of inflation and wage growth. This would save £19 billion annually by 2035, £28.5 billion by 2040, and £38 billion by 2045.
These savings should be directed to poorer pensioners through a new low-income pension supplement worth £30 a week (£1,560 a year), according to the foundation.
Conor Nakkan from the foundation stated: “The triple lock may have been introduced with good intentions but it has become an expensive and poorly targeted policy. It now delivers large increases to all pensioners, including millions who are already well-off, while younger generations face stagnant living standards, high housing costs and a growing tax burden.”
The Tony Blair Institute, another think tank, has estimated that the cost could rise as high as 7.8 percent of GDP by 2070 if the triple lock remains.
The Intergenerational Foundation concludes that action is now urgent, warning that sticking with the current system risks “leaving younger and future taxpayers shouldering an increasingly heavy burden.”
