Triple lock ‘unsustainable’ according to shadow chancellor

01 January 2025

The future of the State Pension triple lock has sparked more debate, with shadow chancellor Mel Stride recently describing the policy as "unsustainable in the very long term". 

The triple lock, introduced in 2010 by the coalition government, ensures State Pensions rise annually by the highest of inflation, average earnings or 2.5%. Ithas been credited with reducing pensioner poverty, but there has been debate about its long term viability.

The new State Pension is set for an 4.1% rise in April 2025, following another year of wage growth. This £475 increase will push the full new State Pension to approximately £12,017. 

For those on the full, old basic State Pension (for people who reached State Pension age before April 2016), the £363 increase per year will take the annual income to £9,206 a year.

With the State Pension increasing every year, the long-term costs of the triple lock could reach anywhere between an additional £5 billion and £40 billion annually by 2050, according to the Institute for Fiscal Studies​. 

Political perspectives

Labour has pledged its continued support for the triple lock, framing it as essential to ensure ‘dignity and security’ in retirement. However, questions remain over whether the government will need to revise the policy in the future due to financial pressures.​ 

Since Kemi Badenoch became leader of the Conservatives, so far there has been no news on whether her party will change its pledge of support for the triple lock. However, shadow chancellor Mel Stride did speak about the triple lock recently. He said: “In the very, very long term, it is unsustainable. Now that is just a mathematical reality. 

“The graph, the cost of the State Pension, will asymptotically approach the entire output for the UK economy if you keep going over many, many, many decades.”

He continued: “We will be looking at every single aspect, including policies around pensioners and so on, as we go forward… What I can assure you is we will continue to stand up for our pensioners.”

The State Pension cost £110.5 billion during the 2022-2023 financial year, accounting for nearly half of the government’s total benefit expenditure. According to the Office for Budget Responsibility, this figure is projected to rise to £124 billion in 2023-2024.

The International Longevity Centre UK is a think tank focused on the challenges posed by increasing life expectancy and declining birth rates. It suggests that to manage the financial strain of an aging population, the UK may need to raise the State Pension age to 71 by 2050 to maintain cost sustainability.

What does this mean for you?

For those approaching retirement, the triple lock's future could significantly impact financial planning. With State Pension costs said to rise to exceed spending on education, policing and defence combined in 2025, a policy revision somewhere down the line may be inevitable. However, for now, pensioners can expect a certain increase in April 2025.

Staying informed about these discussions and the changes being made by the government is crucial for retirement planning. There are free tools to help with this, including the online State Pension age checker and the free Pension Wise guidance service that offers information on your pension and retirement income options.

Sources

Future of the triple lock has sparked intense debate: Mel Stride says triple lock is ‘unsustainable’ and cannot last forever. The Telegraph. Accessed 12 December 2024.

State Pension is set for an 4.1% rise in April 2024: Full State Pension set to rise for most by £362 (4.1%). Money Saving Expert. Accessed 12 December 2024.

State Pension costs projected to rise to £124 billion in 2023-2024: What is the state pension triple lock, and how much is the state pension going up? BBC.co.uk. Accessed 12 December 2024.

State Pension costs rise to exceed spending on education, policing, and defence combined in 2025: What is the state pension triple lock? The Times. Accessed 12 December 2024.