In a speech at the Labour Party conference this week, the Prime Minister revealed plans for the state pension to rise with inflation or 2.5% from 2030, a change from the current policy of having it also reflect average earnings if that is the highest measure. Burnham said the savings generated would help fund his ambitious plan for a National Care Service to alleviate the immense financial strain many older people face in later life.
What the double lock means
Maike Currie, VP personal finance at PensionBee, explored the effects it could have in practice, characterising the approach as a "trade off".
“The triple lock will become a double lock. From April 2030, the earnings element will disappear, leaving the State Pension to rise by the higher of prices or 2.5%. Burnham says the State Pension will retain its value relative to earnings over the longer term, but without official earnings figures in the annual uprating formula, we need to understand how that commitment will work in practice."
Inflation and care costs
The Government expects the double lock to ensure the living standards of pensioners remain on par with the rest of the population, whilst not eclipsing the wage growth of working people.
But Ms Currie suggested inflation could continue to drag pensions up higher than ministers would like.
"With inflation already above the Bank of England’s 2% target and vulnerable to external shocks such as higher energy and oil prices, an inflation-linked double lock could still prove expensive if no cap or control mechanism is in place.
“This is ultimately a trade-off: pensioners giving up the protection of the earnings element of the triple lock in return for greater protection from potentially catastrophic care costs."
Ms Currie highlighted the central tension the double-lock change would see to address, namely, the "unpredictable cost of care" which can "quickly eat into pensions, savings and housing wealth built up over a lifetime".
Tax and the personal allowance
However, Mr Burnham made it clear that the 2024 manifesto commitment to keep the triple lock in place throughout the current Parliament would be honoured, and officials insisted that the state pension will rise by more than the proposed two-lock measure in some years, if needed, to ensure it holds its value relative to earnings.
The full News State Pension for the 2026/27 financial year is £12,548, while the continued freeze on the personal allowance for income tax at £12,570.
It's raised fears that many state pensioners will begin to see income tax eating into their payments. But the PM also vowed that low-income pensioners wouldn't be dragged into having to pay income during this parliament.
"As the State Pension moves closer to the Personal Allowance, it makes little sense to give pensioners an increase with one hand only to claw some of it back in income tax with the other," Ms Currie said. "The commitment that those on the lowest incomes will not be dragged into paying tax is therefore important."
