Future of state pension triple lock guarantee is 'turning into a game of pensions poker’

One expert warned the future of the state pension's triple lock guarantee was 'turning into a game of pensions poker’. 

Steven Cameron, pensions director at Aegon, said that the future of the triple lock pledge hangs in the balance after UK’s main political parties refuse to make a clear decision on whether they will continue with the policy. 

This comes in the same week when the Office for National Statistics’ latest average earnings data showed a growth of 8.5 per cent.

This means it is likely that this rise will be used to uplift the State Pension under the triple lock rules – leading to an increase of £11,501 in the Spring from £10,600 this year.

However, fears for the policy grew after Labour's deputy leader Angela Rayner was reported on BBC News as refusing to promise to raise the state pension in line with the triple lock if her party wins power.

She told the TUC conference she could not commit to the policy, under which pensions rise by the highest of inflation, average earnings growth or 2.5 per cent, until an election.

Cameron said: “In the week where earnings figures are pointing to an inflation busting 8.5 per cent increase in state pensions next April after a 10.1 per cnet increase this year, the state pension triple lock’s future is turning into a game of pensions poker. 

 “Both the Conservatives and Labour are keeping their cards close to their chest with political risks for whoever shows their hand first. The big question is whether to ‘stick or twist’. Sticking with the current formula would create huge and unpredictable costs met from the National Insurance contributions of today’s workers at a time when both parties need to make sure they can visibly balance the books. But being first to ‘twist’ by announcing an end to the triple lock risks losing the support of swathes of older voters.”

Playing politics with the state pension

Cameron added it is important that politicians strike a balance which protects older generations, while making it affordable to those of working age who are also facing financial challenges.

He said:  “While it’s extremely hard to take politics out of state pensions, ideally the way forward would balance the need to protect older generations, many of whom rely heavily on the state pension, with making it affordable to those of working age who are also facing financial challenges. One way of shuffling the deck might be to retain some commitment to considering both price and earnings inflation but to look over a three-year period rather than the highest year on year.” 

Prime Minister Rishi Sunak has also refused to say whether it will be in the next Conservative election manifesto.

However, he has confirmed that the triple lock promise remains the current Government’s policy, indicating that it will be used to decide the next increase, due in April next year.

For every 1 per cent increase in the state pension, the Government will need to find around £900m a year to pay for it.

Earlier this week, Alice Haine, personal finance analyst at Bestinvest, said the escalating cost of maintaining the triple lock for the UK’s 12 million retirees could force the Treasury to make savings elsewhere or even reassess the State Pension age. 

She said: “The heavy cost of maintaining the triple lock for the UK’s 12 million retirees could force the Treasury to make savings elsewhere or even reassess the state pension age. 

 “Looking ahead, wage growth is expected to slow in the second half of the year as the softening labour market feeds through to pay increases along with inflation, so retirees may not see such large jumps in their state pension in the years to come – even if the triple lock is maintained.”