THE TRIPLE LOCK
As many people are aware, the UK state pension increases by either, CPI, earnings or 2.5% minimum. This is great for the pensioner, and I will benefit from this when I get to 67. However, I am not sure that people understand how unfair it is on the younger, working age people who are going to get increasing levels of taxation imposed on them to cover the costs.
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Since the triple lock was introduced (2011), the state pension has increased by 80% whilst inflation has only increase by 55%. Average earnings has increased by 58.8% just keeping ahead of inflation.
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So, all those below the state retirement age have been paying a higher and higher proportion of their wages / taxes to cover someone else’s state pension.
In fact, if the triple lock continues, the state pension would continue to increase at a higher rate than peoples wages until such time, it becomes impossible to continue due to the size of the black hole in the government’s finances. Things have to change.
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To understand the scale of the problem, in 2025-26, the UK government is projected to spend approximately £145.6 billion on the state pension which equates to £5100 per household per year.
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If the increase had been based upon inflation (CPI) alone, the government spending on the state pension would have been about £20 billion less per year.
Over the period of time that the triple lock has been place, I estimate the triple lock has cost the country £120 billion extra (2011 to 2025) than it would have cost, had it been calculated by inflation alone.
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The problem is only getting bigger.
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The projected number of those of pensionable age in the UK will increase from the current 13.4 million to 15.6 million in 10 years, which in today’s terms will increase the bill by £26.34 billion (2.2 million x £11,973 per year)
If the level of pension is increase over the next 10 years at the same level of the last 10 years, that will be an increase the cost of the state pension by a further £74 billion resulting in a total annual cost in 2035 of £245 billion.
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The country cannot afford this level of triple lock increase that, on average, is always going to be more than wages.
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Don’t get me wrong, I do not want the old and vulnerable to be without food and heat. (Winter fuel allowance to be covered on separate Blog) but many pensioners have other private / company pensions, meaning they are not living on state pension alone.
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The average personal pension size of someone in their 60’S is £190k which if taking an annuity at 67 would produce and income of over £15k (single life level no guarantee) That is not an insignificant amount, yet they are being increasingly supported by those who are working.
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It is reported that currently, 70% of pensioners receive income from private pensions. This percentage is increasing due to auto-enrollment in pension schemes which means that, only 7% of those under 35 will relying on state pension alone. This gives ample opportunity and time (42 years) to reduce this percentage.
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The other problem with the triple lock happened for the 2 years 2023/24 and 2034/25.
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In 2023/24, the pension was adjusted by 10.1% as it was higher than the wage increase of 5.54%. However, the year later, wage rises rose by 8.5%, basically because wages were increased due to the effects of inflation the previous year. —
So the pension had the effect of the inflation of 2023/24 in both years. None of the political parties wanted to rock the boat as an election was coming up and did not want to address the situation.
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My solution
- Scrap the triple lock and just link State Pension Increases to Inflation. This should keep the status quo for pensioners so that they are no better or worse off due to inflation.
- This would save £34 billion per year (in the year 2034/35) if the increase was based upon what happened over the last 10 years with a total saving over 10 years of £190 billion.
- I hear in my head all those critics that say, well the last 10 years have been exceptional, due to covid and the effects of the Ukraine war on fuel costs, which I am inclined to agree with.
- I estimate that if we exclude the extreme triple lock adjustment years, the saving would still be £18 billion or £79 billion over 10 years. The pensioners will still get increase covering inflation / cost of living so that they are no worse or better off. If they wish to be better off, they need to do that as an individual by having a job or making provision before retirement, as 70% of people already do and 93% of under 35’s do.
- Do not allow opt out of Private Pension.
- Self employed required to make pension provision and this must be detailed on annual tax return.
- The pensions credit system remains as is, allowing a top up to pensions for those who fall short. Overtime as more people retire with some form of Personal Pension, the cost of this will fall.
- Use some of this money to reinstate the Winter Fuel Payment to those whose income is below a certain level. Those high earning pensioners do not need it and should be excluded (A separate Blog on this subject will be done in due course) This would cost a max of £1,889 billion of the saving (£2.2 billion(2024 cost) minus 0.311 billion(2025 cost)
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Conclusion
- All the Major parties should get together and agree on the removal of the Triple lock. However, I fear none of them have the bottle and there will always be one who will pledge to keep it on the hope it will get them into power.
- However, I think if this is all explained in detail why we cannot continue, the vast majority of the pensioners will understand, after all, those with private pensions have all benefited from the tax breaks that have helped build up their pension pots.
If it was up 2 me 
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