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Rishi Sunak hints pensions triple lock could be scrapped

·Senior City Correspondent, Yahoo Finance UK
·2-min read
UK chancellor Rishi Sunak. Photo: HM Treasury/Flickr
UK chancellor Rishi Sunak. Photo: HM Treasury/Flickr

The UK chancellor has sparked speculation that the government could be preparing to ditch the state pension "triple lock" as COVID-19 sends the cost of the pledge soaring.

Rishi Sunak said there were "legitimate concerns" about the "fairness" of the triple lock system during several media appearances on Thursday morning.

“The triple lock is the government’s policy but I very much recognise people’s concerns," Sunak told BBC Breakfast. “I think they are completely legitimate and fair concerns to raise."

The chancellor's comments come a day after the Office for Budget Responsibility said the policy could cost the government £3bn over the next year. 

The Conservative Party introduced the "triple lock" on the state pension in 2010. The party promised to increase pensions by inflation, average wage growth or 2.5% each year – whichever was higher.

Concerns have been growing about the sustainability of the pledge due to COVID-19. The recent unlocking of the UK economy has led to surging inflation and wage growth, which will inflate pension increases under the triple lock system. State pensions are now on track to rise by 8% next year.

"The Covid crisis has laid bare the design faults of the Triple Lock, with a severe jobs crisis last year inadvertently contributing to an unnecessary and unjustified 8 per cent rise in the state pension next year," said Lord Willetts, president of think tank the Resolution Foundation.

Read more: Has COVID-19 put the pension triple lock at risk?

Sunak hinted at a looming overhaul or abandoning of the pledge during interviews on Thursday morning.

"We will approach these decisions with fairness in mind – fairness for pensioners, but also for taxpayers," Sunak told BBC Radio 4's Today programme, adding that there were "some questions around the earnings numbers".

Torsten Bell, chief executive of the Resolution Foundation, said on Twitter that Sunak's comments suggested he was "definitely not sticking with the triple lock". 

David Gauke, the UK's former Justice Secretary and an ex-Conservative MP, said the chancellor's comments were a "clear hint … that there won’t be an 8% increase in the state pension because of the way the triple lock is calculated".

Bell said Sunak was likely to "redefine" the triple lock by averaging pension increases over two years, rather than one, to soften the outsized impact of recent inflation and wage growth.

Lord Willetts said: "The Chancellor should take the opportunity this autumn to replace the triple lock with a smoothed earnings link. This would mean the state pension would rise in line with the living standards of working-age people – a change that would be fair to all generations."

Watch: Why can't governments just print more money?

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