The pension triple lock will add billions of pounds to public spending in the decades ahead, the UK's official forecaster has said, after Andy Burnham suggested he would protect the measure. The Office for Budget Responsibility (OBR) warned that debt levels could spiral to three times the size of the economy if not addressed by governments.
Triple Lock Mechanism and Its Impact
Under the triple lock, the UK's state pension rises each year by whichever is highest out of inflation, wage growth, or 2.5%. The OBR warned in its latest annual fiscal risks and sustainability report that the policy measure would ramp up government spending in the decades ahead. Under its baseline scenario, state pension spending is projected to rise from 5% of gross domestic product (GDP) to about 9% by 2075-2076, and is therefore a big driver of increased pressure on overall public spending. This is partly driven by an aging population, while the triple lock is estimated to account for about a third of this rise.
Costlier Than Expected
Volatile inflation and earnings growth mean the triple lock has been more costly than initially expected when introduced in 2012. The OBR estimates that the triple lock will have added about £15.5 billion to state pension spending each year by 2029-2030, up from the £5.2 billion a year originally costed. Tom Josephs of the OBR said: "It is certainly a substantial pressure on public spending over the longer term and is making a very significant contribution to that upward pressure on spending."
Alternative Scenarios and Debt Projections
If the state pension rises with earnings rather than the triple lock, it would reduce pressure on spending by about 2% of GDP, the OBR estimated in its modelling for alternative options. The OBR used its report to call on the UK to take early action to prevent debt from moving on to an "unsustainable and ever-rising path." Under its baseline scenario, rising borrowing each year results in UK debt levels soaring from about 95% of GDP in 2030-2031 to about 300% of GDP by 2075-2076.
Political Context
Andy Burnham, who is seen as the frontrunner to replace Sir Keir Starmer as prime minister, has suggested he would stick to the 2024 Labour manifesto when asked whether he would move to scrap the pensions triple lock.
