State pensioners could see a widening gap between the basic and full state pensions from next spring, as Andy Burnham's pledge to keep the triple lock risks exacerbating the disparity. A 4.1 per cent hike would take the full state pension to £251 a week from April 2027, but the basic state pension would remain at £192, a difference of £58 per week.
Triple lock metric and wage growth
Wage growth is expected to be the deciding metric for this year's triple lock calculation, which will determine how much the Department for Work and Pensions (DWP) state pensions rise from April 2027. A 4.1 per cent rise was announced earlier this week, but the basic state pension would lag behind, according to reports.
Labour Party leader Mr Burnham has committed to maintaining the triple lock, stating he is keen to assist where possible amid the ongoing cost of living crisis. The triple lock guarantees that the state pension increases by the highest of inflation, average earnings growth, or 2.5 per cent.
Economic advisers and cost concerns
Mr Burnham has recruited several respected economists to his team as part of efforts to reassure markets. These include former Treasury minister Lord O’Neill, former Bank of England chief economist Andy Haldane, and former OBR Chief Richard Hughes. According to The Times, the advisers believe scrapping the expensive triple lock, which is due to cost taxpayers billions, is a “no brainer” amid growing pressure on public finances.
However, speaking at a launch event for the OECD’s report, pensions minister Torsten Bell said: “The government’s manifesto commitment is to the triple lock throughout this parliament, and that is going to happen.” The OECD report suggested there is scope to review the current tax system and potentially eliminate some VAT exemptions to raise more money for government spending.
VAT and pension system reform
The OECD report stated: “If raising tax becomes a last-resort necessity”, then “raising VAT seems the most prudent option”. Mr Bell responded: “Right now is a good time to reform the private pensions system, and that’s exactly what we’re doing. It’s not a good time to raise VAT when you’ve just been through a cost-of-living crisis and the Bank of England is trying to sustainably bring inflation to target.”
The gap between the basic and full state pensions is set to widen further, with the full rate rising to £251 a week from April 2027, while the basic rate remains at £192, a £58 weekly difference. The triple lock commitment remains in place for this parliament, despite concerns over its cost.
