House of Lords peers have called for the State Pension Triple Lock uprating system to be reviewed, with concerns raised over its long-term cost to public finances during a debate on the UK's fiscal outlook on Thursday.
The Triple Lock guarantees that the New and Basic State Pension rises each April by whichever is highest of average earnings growth, Consumer Prices Index (CPI) inflation or 2.5 per cent. The policy is protected for the remainder of the current Parliament, but several peers questioned what system should be used beyond the next General Election.
Peers question sustainability of Triple Lock
Conservative peer Lord Hill of Oareford, who served in David Cameron's Cabinet when the coalition government operated the Triple Lock, called for politicians to confront the future of the policy. Speaking in the Lords, he asked: "What are we going to do about the pension triple lock?" He argued that the policy was becoming increasingly difficult to justify because it transfers money from a declining number of younger people to a growing older population.
However, other peers warned against simply scrapping the Triple Lock without considering what would replace it and whether the State Pension itself is currently set at an appropriate level. Labour peer Lord Davies of Brixton said he supported his party's commitment to maintain the Triple Lock until the next election, but added: "The inevitable question is: what follows?"
He said: "A number of people simply say that we need to abolish it. I am sorry, but this is facile - that is only a part of the equation, because you also have to say what should replace it. Crucially, we must also discuss the right level of the state pension, because the debate about the triple lock is as much about this as the technical details of the revaluation basis."
Proposal for 'triple average' system
Lord Davies suggested these issues should be considered by the Pensions Commission, which he said is expected to report early next year. He also defended the Triple Lock's role in protecting people on lower incomes, pointing out that it applies to the new State Pension and basic State Pension rather than every element of State Pension income. He said the policy had helped bring the State Pension close to the level envisaged by the 2005 Pensions Commission, but acknowledged that its biggest drawback was its cost to the public finances.
The debate also produced a specific proposal for replacing the current system. Former Labour pensions minister Lord Rooker said the Triple Lock was now "unsustainable" and proposed replacing it after the next election with what he described as a "triple average". Instead of increasing payments by the highest of inflation, earnings growth or 2.5 per cent, his proposal would effectively use an average of the three measures.
Lord Rooker told peers he had carried out calculations with the House of Lords Library showing how such a system would have affected recent increases. He said: "If it had been used in the past three years, the increases would not have been 10.1%, 8.5% and 4.1%; they would have been 6%, 5.9% and 2.8%." He added: "The triple average could work after the next election. It is easy to explain and fair."
Defence of current system and uprating forecast
Crossbench peer Lord Burns also highlighted the long-term effect of the Triple Lock on spending. He told the Lords that the policy was deliberately designed so pensions could grow faster than earnings, adding that economic growth alone would therefore not resolve pressures on the public finances. However, Conservative peer Lord Redwood defended the existing system and said both Labour and the Conservatives should honour their election promises.
He said: "I do not share the view of those who think we should pick on the pensioners or the disabled to make particular sacrifices at this juncture." He added that both parties "were right to promise the triple lock in the election and should keep to their word".
The UK Government did not announce any change to the Triple Lock during the debate. Responding for the Treasury, Lord Pitt-Watson said the Government faced long-term fiscal challenges and was committed to reducing borrowing and getting debt down, but warned that he could not discuss measures that could feature in next month's Budget.
The debate comes as attention turns towards the uprating that will apply from April 2027, with the relevant earnings and inflation figures determining which element of the Triple Lock sets next year's increase. Chancellor John Healey will confirm the annual uprating at the Autumn Budget next month. An uprating of 4.1 per cent on the current State Pension would see people receive the following amounts.
Full New State Pension: Weekly: £251.20 (from £241.30); Four-weekly pay period: £1,004.80 (from £965.20); Annual amount: £13,062.40 (from £12,547). Full Basic State Pension: Weekly: £192.50 (from £184.90); Four-weekly pay period: £770 (from £739.60); Annual amount: £10,010 (from £9,614).
