The Resolution Foundation has renewed calls for the State Pension Triple Lock to be replaced with a less generous earnings-linked system. The independent think tank argues that pensioners have seen significantly stronger income growth than the rest of the population over the past two decades.
Key Findings from the Report
In a report published on Wednesday, researchers stated that pensioners have experienced three times as much living standards growth as non-pensioners over the last 20 years. They are now less likely to be living in poverty than the wider population. A typical pensioner household now has a similar level of income to a typical working-age household, prompting questions about the necessity of the Triple Lock.
What is the Triple Lock?
The Triple Lock policy guarantees that the State Pension increases each year in line with earnings growth, Consumer Price Index (CPI) inflation, or 2.5 per cent, whichever is highest. It was introduced to protect the value of the State Pension and has boosted retirement incomes since its inception.
However, the Resolution Foundation argues that the policy has become an increasingly expensive commitment for taxpayers. They propose replacing it with a "smoothed earnings link." Under this system, the State Pension would generally rise with earnings growth but still offer protection during periods when inflation outpaces wage growth.
Financial Impact
According to the report, the Basic State Pension is now around 11 per cent higher than it would have been if linked solely to earnings growth since 2012. The think tank estimates that the Triple Lock has increased annual State Pension spending by approximately £12.6 billion compared to a smoothed earnings link. Overall spending is around £9 billion higher after accounting for income tax receipts and lower means-tested benefit payments.
Replacing the Triple Lock from 2027/28 could save around £650 million by 2029/30, with savings growing over time. The report states: "The time to favour pensioners over typical workers is over." It adds that pensioner incomes had already caught up with working-age households before the Triple Lock was introduced.
Expert Reactions
Retirement specialists have expressed concerns. Lily Megson-Harvey, policy director at My Pension Expert, said: "The Resolution Foundation is right to raise questions about the long-term sustainability of the Triple Lock, but for millions of pensioners this is about financial security. Many retirees are grappling with rising living costs and uncertainty. Scrapping the Triple Lock without a clear alternative risks undermining confidence in retirement planning."
The full New State Pension is worth £241.30 a week, while the full Basic State Pension is £184.90 a week following the 4.8 per cent increase in April. The Labour Government has pledged to maintain the Triple Lock throughout the current Parliament, so no changes are expected before the next general election. However, the report is likely to reignite debate on future uprating as the cost of supporting an ageing population rises.
