Under the ‘triple lock' the state
pension increases each April in line with the highest of CPI
inflation, average earnings growth, or 2.5%. The CPI inflation
figure to be released tomorrow is expected to be below the
average earnings growth this year, meaning that the state pension
is likely to rise by 4.8% next April. This means a full rate of
the new state pension of £241 per week.
Since the introduction of the triple
lock in 2011, the value of the state pension has risen much
faster than either earnings or prices – in April 2026 it is
expected to be £30 per week or 14% higher than it would have been
under average earnings indexation since 2011. Spending on the
state pension is now £12 billion per year higher than it would
have been if we had increased the state pension in line with
average earnings since 2011. Looking ahead, the triple lock is
both on average expensive, and also adds a great deal of
uncertainty to public finances, as future increases to the level
of the state pension depend on potentially volatile indicators
that ratchet up spending in an unpredictable
way.
A better way forward is possible,
through a government commitment to a target level of the state
pension relative to earnings in the long run, combined with
inflation protection in periods where real earnings are falling.
This approach – which Australia uses for its state pension –
would provide more predictability while still ensuring the state
pension keeps pace with rising living standards over
time.
Heidi Karjalainen, Senior
Research Economist at IFS, said:
“Spending on the state pension is
expected to rise by around £80 billion in today's terms by the
2070s. More than half of this increase is projected to come from
the triple lock, but because the triple lock ratchets up the
value of the state pension in a very unpredictable way, that
figure could actually be much
higher.
Maintaining the triple lock over the
long term will have to mean either higher taxes and/or lower
spending elsewhere. And this spending pressure would, if left
unchecked, come on top of increasing pressure for more spending
on health and social care".
ENDS
Notes to Editor
What are the effects of the
‘triple lock' and how could it be reformed? is
an IFS briefing by Heidi
Karjalainen.
The briefing is available to read
HERE
