Labour has been urged to overhaul the current pensions system as the triple lock is warned it "can't go on forever". Paul Johnson, former director of the Institute for Fiscal Studies (IFS), called on the Government to address the scheme that is projected to cost £15.5 billion a year by 2030.
Writing in The Times, Mr Johnson said: "The triple lock clearly can’t go on forever." He called for a shake-up as part of the Department for Work and Pensions' (DWP) review of the retirement age framework. The triple lock was also pinpointed by the Office for Budget Responsibility (OBR) as a major strain on public finances, potentially costing 7.5% of the UK's entire GDP within the next 50 years.
Under the scheme, the state pension increases annually by either the rate of inflation, average wage growth or 2.5% - whichever is highest. The IFS previously called for Labour to scrap the triple lock and promise never to mean-test pension payments to generate an extra £11 billion a year.
Its Pension Review, in conjunction with the Financial Fairness Trust, included reforms to help vulnerable groups and enhance private savings schemes. It also included a guaranteed state pension framework and provided practical solutions for people to manage their pensions during retirement.
While the state pension is not currently means-tested, the IFS called for support to be improved for those approaching retirement age. It called for ministers to establish a specific benchmark for a new state pension, relative to typical wages. Annual increases would then match average wage growth as opposed to the triple lock scheme.
Under the proposed scheme, every employee between 16 and 74 would get mandatory contributions from their employer, valued at 3% of their salary, regardless of whether they contribute themselves. The IFS said this would increase default contribution rates under automatic enrolment and protect the take-home pay for people earning less.
