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OECD urges Jeremy Hunt to shake-up pensions triple lock

Aaron Chown, PA Images

Jeremy Hunt should scrap the pensions triple lock to pay for net zero policies, the Organisation for Economic Cooperation and Development (OECD) has said.

The Paris-based economic body said the UK should reform the pensions triple lock to improve public finances.

"Reforming the costly triple lock uprating of state pensions would help, by indexing pensions to an average of CPI [consumer price index of inflation] and wage inflation, and by providing direct transfers to poor pensioners to mitigate poverty risks," the OECD said.

Read more: What the autumn statement means for your finances

The triple lock means that the state pension must rise every April by whichever is highest out of average earnings, inflation or 2.5%. Next year, it is going up by 8.5%, from £10,600 to £11,502.

The Institute for Fiscal Studies (IFS) said the triple lock added an extra £11bn a year to public spending.

The OECD said that the UK government should do more to shore up the public finances.

"Maintaining and strengthening current fiscal efforts is essential against the challenging backdrop of high borrowing and debt, and as higher debt interest payments have eroded fiscal headroom,” it said in its report.

The OECD forecast UK gross domestic product (GDP) to grow 0.7% next year — down slightly from its previous forecast of 0.8% — and by 1.2% in 2025. This sets the UK economy up for the second-slowest growth of the world’s G7 advanced economies.

Read more: Are you missing out on thousands of pounds in lost pension income?

“In the United Kingdom, GDP growth is projected to be subdued, with higher fiscal pressure weighing on household disposable incomes, but to improve from 0.5% in 2023 to 0.7% in 2024 and 1.2% in 2025,” the OECD said.

The UK is also set for the highest inflation rate across the G7 this year, averaging at 7.3% for 2023.

The OECD also expects the Bank of England to hold interest rates at the current level of 5.25% until 2025 when they would start to drop to 4% by the end of that year as inflation subsides.

Watch: UK urged to reform pensions triple lock by OECD

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