Will reforming the triple lock pay for social care reform?

Since it was introduced by the coalition government in 2011, the triple lock has guaranteed that the UK state pension rises each year in line with whichever is the highest of inflation, average wages, or 2.5%.

Burnham said that from April 2030, instead, it would only rise in line with the highest of inflation or 2.5%.

The prime minister added that “it will hold its value relative to earnings over time”.

We are still awaiting full details from the government, but the Institute for Fiscal Studies (IFS) think tank, external says the new proposed system would ensure that the state pension rises by whichever is highest of:

The IFS says the key change is that the state pension will not automatically jump up with average wage increases every year, but only broadly track them over a longer period of time.

That is important because in some years the triple lock has meant the state pension has risen faster than earnings.

“The removal of this permanent ratchet is to be welcomed and marks a substantial step towards a more sustainable and predictable state pension system,” the IFS says.

The IFS estimates that the present triple lock will increase annual state pension expenditure by £16bn a year by 2026–27, compared with if it had risen in line with average earnings growth since 2011.

It says that if the new lock had been in place instead, spending would be £9bn a year lower than it currently is.

There is considerable uncertainty about future savings though because the cost of the triple lock is linked to the future volatility of people’s earnings and inflation, which are impossible to confidently forecast.