State pensioners born after 1951 are in line for an extra £39 a month under Andy Burnham's commitment to keep the triple lock, according to reports. The full state pension, currently £965 monthly, would rise to £1,004, representing a £39 increase.
Triple lock mechanism and wage growth
Wage growth is expected to be the deciding factor for the Department for Work and Pensions (DWP) triple lock next April. Under the policy, the state pension — paid at a new, full rate for retirees born after 1951 — increases each year by September's inflation figure, 2.5%, or the average earnings growth between May and July, whichever is highest. Next month's earnings figure, covering May to July, will be used to calculate the rise from the Labour Party government.
Unless inflation rises sharply from its current rate of 2.6% in the next three months, the average earnings growth figure will likely determine how much the state pension increases next April.
OECD and OBR warnings on fiscal impact
Earlier this summer, the Organisation for Economic Co-operation and Development (OECD) said the Labour Party government should maintain momentum on policy reforms to improve living standards and economic performance. The Paris-based organisation described the triple lock as "unusually generous" compared to other countries.
In a report, the OECD stated: "The triple lock indexation of state pensions puts upward pressure on public expenditure and adds significant fiscal risks by exposing public finances to supply shocks, thus requiring a timely reform that overcomes political economy constraints." The OECD added that the government's effort should focus on setting the ground for lasting reform, given the political economy challenges and the existing commitment to the triple-lock guarantee over the current Parliament. This should go hand-in-hand with explaining how a new approach to state pension will be effective and fair to ensure reforms are publicly accepted, the OECD said.
The OECD's remarks echo similar calls by the Office for Budget Responsibility (OBR) last week, which warned that the triple lock is a "substantial pressure on public spending" over the longer term.
