Can the triple lock survive the elections? Rishi and Keir play poker about the future of the state pension

For Britain's 12.5 million pensioners, the triple lock state pension scheme was undoubtedly the silent hero of 2023.

As the cost of essentials, from butter and eggs to fuel and clothing, soared, the triple lock made these price increases more bearable for retirees.

This is because the state pension forms the basis of most retirees' income.

As long as inflation rises every year, retirees are protected from the worst ravages of inflation.

The triple lock promises to increase the state pension every year by inflation, average wage growth or 2.5 percent – ​​whichever is higher.

This resulted in a record increase of 10.1 percent in April 2023, thanks to sharply rising inflation.

It has been in existence since 2010 and steadily increases the value of the state pension in real terms every year.

But like any benefit, it also comes with a cost. According to financial firm Canada Life, an increase in the state pension of just one percentage point will add another £900 million to the bill.

At a time when government budgets are under pressure, every policy and pound of spending is under scrutiny.

It is therefore no wonder that pension experts believe that the days of the triple lock are numbered. The only question is how long will it survive – and what will replace it?

Will the system survive 2024?

Regardless of the long-term future of the triple lock, retirees can be assured of one thing: an increase in the state pension is guaranteed this year.

Chancellor Jeremy Hunt promised an 8.5 per cent increase in the state pension from April 6 this year in his autumn statement in November.

Thanks to the triple lock, the state pension will rise to match the level of average worker wage growth last year.

From this date, eligible pensioners will receive £221.20 per week for the new full state pension, or £11,502 per year, and £169.50 per week for the old basic pension, or £8,814 per year. But what will happen next is less clear.

The general election – expected to take place this year – is the next event that will inevitably shed some light.

Both major parties have maintained their plans for the triple lock if they win. But they will be under pressure to show their hand in their party manifestos or as the election approaches.

Steven Cameron, director at pension company Aegon, compares this process to 'state pension poker'.

“Although the triple lock will be honored in April, its future election is up for grabs regardless of whether Labor or the Conservatives are in power,” he says.

'Neither of them have made any commitment – ​​it's a bit like state pension poker – no one wants to raise their hand. Because it is so valuable to millions of people, any weakening of the triple lock could lose votes.”

Steve Webb, former Pensions Secretary and now a partner at pension consultant LCP, predicts that the triple lock is simply too highly valued by voters for either party to abandon it.

“It seems unlikely that the Conservatives will now abandon the triple lock for their manifesto,” he says.

'In terms of voting intention, age is the best predictor, and the current pattern is that remaining Conservative support is heavily concentrated among older voters.

'It would be very surprising if the Conservatives made a policy change that was “laser-targeted” at their core support.'

Webb adds that while the Labor Party will try to make cost savings, it is unlikely that the triple lock will be abolished if the Conservatives do not, as its strategy is to avoid controversy and disagreement.

However, not all experts are so sure that the triple lock will survive. Helen Morrissey, of wealth platform Hargreaves Lansdown, is one. “The future of the triple lock looks precarious at best,” she says.

Morrissey cites research showing that she is far from alone in her skepticism. 'Research found that 18 percent of people do not believe the state pension will exist when they retire. Another 26 percent were unsure,” she says.

What could happen next?

Former pensions minister Ros Altmann predicts that the three-way lock will remain in place until the next election, but will be changed under whichever government emerges.

A good review would not come too soon, she argues. Altmann proposes a 'double lock' model as a suitable replacement, removing the 2.5 percent element – ​​a number that increases long-term costs and is seemingly arbitrarily set.

However, she is urging the governments in power to take a much deeper look at how the state pension is delivered, in a bid to make it fairer for everyone.

That's because when you dig into the details, not all retirees benefit from the triple lock promise. Pensioners under the age of 72 are fully protected because they receive the new state pension.

But those who are older and therefore receive the old state pension only benefit from the triple lock on the basic element; other components that supplement the AOW, such as Serps and deferred payments, are not included.

“And the triple lock has never applied to pension credits, which the poorest retirees need to supplement their income to avoid poverty,” Altmann adds.

Are there other options?

The cost of the state pension is already £124.3 billion and is rising steadily thanks to the triple lock and an aging population.

In the past, the government has kept the bill under control by raising the state pension age.

This is an option that a future government could take. It is planned to rise to 67 between 2026 and 2028 and to 68 between 2044 and 2046, but this second date could be brought forward.

However, life expectancy is no longer increasing at the rate it once did – and many people simply cannot work until their mid-to-late 60s.

Experts, including Ros Altmann, argue that pensioners in poorer health would be unfairly penalized by increases to the state pension age, while those who are richer and healthier would be better placed.

Can it all just be left alone?

The second alternative is to keep the triple lock in place and accept that it does a valuable job even if it is flawed.

After all, although the state pension is rising, it is less generous in Britain than in most other advanced economies.

Tom Selby of wealth platform AJ Bell said: 'By maintaining the triple lock, the government is effectively admitting that the state pension is too low.

'By keeping this in place, policymakers can avoid the thorny question of exactly what level the state pension should be set at, and instead leave it to economic trends to determine future increases.'

rachel.rickard@dailymail.co.uk