New Chancellor John Healey is facing calls to scrap the state pension triple lock, a policy originally introduced by the Conservatives. Healey, former Defence Secretary, was appointed by Prime Minister Andy Burnham, replacing Rachel Reeves.
Growing pressure from economists
A number of leading economists and experts argue the triple lock has become unsustainable and is costing the nation too much. The policy guarantees an annual pension increase in line with the highest of inflation, wage growth, or 2.5%. A volatile year with high inflation or a sudden spike in wages can send the pension bill soaring, binding the Government into potentially huge payouts.
The influential Organisation for Economic Cooperation and Development (OECD) is the latest group to call for change. Mark Pemberthy, benefits consulting leader at Gallagher, said: "Andy Burnham has declared he has a plan, but we may need to wait a while before we know exactly what that means for pensions. There are indications that social care funding will get an overdue review. This may be a catalyst to review the state pension triple lock - despite repeatedly backing Labour’s commitment to retaining the policy, it is difficult to see how this is affordable in the long term while also improving funding for healthcare and social care for an ageing UK population."
Political obstacles remain
Burnham has ruled out any changes to the triple lock during this Parliament. However, should Labour win the next general election, the picture could change heading towards the next decade. Scrapping the triple lock could be politically explosive, but experts say a Prime Minister will eventually have to grasp the nettle.
Angeline Ong, senior investments analyst at IG, said: "The OECD has added its voice to a growing chorus questioning the long-term sustainability of the triple lock, but politics remains the biggest obstacle to reform. Burnham has effectively boxed himself in by committing to preserve it, making any near-term changes highly unlikely."
