The incoming Prime Minister, Andy Burnham, faces mounting pressure to abolish the state pension triple lock, a policy described as "unusually generous" by international experts. The Organisation for Economic Cooperation and Development (OECD) has called for an end to the pledge, which has been in place since 2011.
What is the Triple Lock?
The triple lock guarantees that the state pension increases each year by the highest of wage growth, inflation, or 2.5%. While designed to protect pensioners' incomes, the OECD argues it places excessive strain on public finances. In a special chapter on pensions, the OECD stated that the policy "puts upward pressure on public expenditure and adds significant fiscal risks by exposing public finances to supply shocks, thus requiring a timely reform."
Why Scrap It?
The OECD warned that during periods of macroeconomic volatility, the triple lock can generate "sharp and unpredictable increases in pension expenditure." This was particularly evident during the 2021-2023 energy crisis, when prices spiked and wages later caught up, skewing risks upwards. The report also noted that "modest growth, high public debt, high interest payments and increasing spending pressures from ageing, climate and defence are limiting fiscal space."
Political Context
Andy Burnham is set to become Labour Party leader next week after Sir Keir Starmer's resignation, with Burnham running unchallenged for the position. The OECD's call comes as Chancellor Rachel Reeves' spending review leaves "limited room for manoeuvre." The report suggests that tax reforms should prioritize strengthening efficiency and revenues rather than raising headline rates, as the tax burden is already high and the system remains complex and distortionary.
Response from Government
Responding to the OECD report, Chancellor Rachel Reeves stated: "The OECD agrees that we have restored stability, putting the economy in a much stronger position than it was two years ago."
