Yahoo Finance Fears triple lock could be scrapped over state pension funding dilemma
The future of the valuable state pension triple lock has been thrown into doubt after an independent report urged the Government to cap its spending.
A report by Baroness Lucy Neville-Rolfe recommended this week state pension spending should be capped at 6pc of gross domestic product. It currently stands at 4.8pc of GDP, but is expected to rise to surpass 6pc in just three decades.
A cap would force the Government to either accelerate rises in the state pension age, so that it reaches 69 by 2048, or scrap the triple lock, experts have warned.
The triple lock uprates state pension payments each spring in line with the highest of the previous September’s inflation, wage growth or 2.5pc.
The policy has proved highly popular among retired voters, who will receive the biggest state pension pay rise on record next month at 10.1pc, but is costly. The full new state pension will rise to £10,600 per year.
This has put pressure on public finances, and is expected to cost the Government an extra £11bn in state pension payments in the upcoming tax year.
John Cridland, who conducted the last independent report on the state pension age in 2017, warned MPs last month that the triple lock should be axed to stop the state pension age from rising.
Mr Cridland told the Work and Pensions committee in February: “If there were those in government who felt that the pension age increase needed to come earlier or go further, then the triple lock could not be sacrosanct – the triple lock had to be looked at.”
Mr Cridland added that while people “want their pension to be as valuable as it could be”, they also “want to live long enough to get their pension”.
“Having the triple lock as a given, but endlessly having to push up the state pension age, doesn’t necessarily serve all pensioners,” he said.
The current state pension age is 66 and is in the process of rising to 67. Ministers had been considering plans to accelerate the rise by around a decade to the mid 2030s, but Work and Pensions Secretary Mel Stride told MPs on Thursday that the accelerated increase had been abandoned in light of a fall in life expectancy.
However, Jon Greer, of the wealth manager Quilter, said that the Government’s decision to opt for a later increase in the state pension age had simply kicked the issue of its sustainability down the road.
“If they choose not to raise the age then it does not leave the Government with many levers it can pull,” he said.
“It may leave the Government with the choice of reviewing the triple lock and replacing it with a less generous uprating mechanism or accepting that funding for state pensions is going to increase through higher taxes or national insurance.”
The Government acknowledged in a separate review that there was uncertainty around the recommended 6pc cap and that it could lead to a "number of rises in state pension age, disproportionately impacting those with lower life expectancies".
