Prime Minister Andy Burnham announced a revision to the triple lock, but raised questions over the ability of the change to finance his new National Care Service.
Under the current triple lock – which will be maintained for the rest of this parliament – the state pension rises each year on which is highest: inflation, 2.5% or wage growth.
The “adjusted triple lock” will guarantee that the State Pension will still rise every year by either inflation or 2.5%, whichever is higher, but it will now rise by more than this if needed in some years, to ensure it holds its value relative to average worker earnings.
Effectively this reduces it to a “double lock” as the earnings link will be gone on an annual basis, and instead be reflected over time.
Retaining the State Pension until 2030 means it is set to rise by over £2,000 a year, reaching almost 30% of average earnings by the end of the decade – the highest it has ever been.
Labour says that the new triple lock – dependent on the party returning to power in 2029 – will mean that if inflation spikes, pensioners will be protected.
If wages rise, pensioners will share in that, with the State Pension tracking earnings over time. Nobody’s pension will ever go down. And State Pensions will be put on a sustainable footing for decades to come.
The Prime Minister was upfront about the fact that this approach does mean that in the 2030s the State Pension will not rise as fast as it would otherwise have done.
“However, this will enable us to fix social care for all,” said the party because it saves the states billions compared to official projections of the long term cost of triple lock.
The Institute for Fiscal Studies said the changes are generally positive and will likely generate small savings to the Exchequer in the next parliament, but they will not be enough to fund universal social care.
Over time the new triple lock will prevent the state pension being locked into an ever-increasing level of generosity compared to workers’ earnings, thereby generating significant savings in the long run, it said.
Jonathan Cribb, deputy director at the IFS, said: “For years, we at the IFS have been calling for the government to find a better way to increase the state pension than the triple lock.
“The old triple lock is not a good way to achieve any policy goal. Most importantly, it is both very expensive and very unpredictable.
“The new, reformed triple lock from 2030–31 is not perfect, but it is a substantial improvement on the status quo. The Prime Minister should be commended for grasping the nettle and helping to put the state pension system on a more secure and sustainable footing.”
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