There were fresh calls this week for the state pension “triple lock” to be ditched as debate rages over whether the UK can afford it.

The triple lock guarantees that the state pension goes up each year in line with inflation or wage increases or 2.5% – whichever is the highest.

In the latest intervention, the British Chambers of Commerce has called for the policy to be scrapped, and the money saved to be put towards tackling the youth unemployment crisis.

Meanwhile, a leading economic thinktank has added fuel to the fire by reminding everyone of the multibillion-pound cost of the policy.

So what is the triple lock, is it a good or a bad policy, and is it destined for the chop? Here are four things you need to know:

It was introduced by George Osborne (sort of)

A few years ago, a Guardian opinion piece claimed that George Osborne – who served as Conservative chancellor from 2010 to 2016 – was “the most deliberately, intentionally, knowingly poverty-causing chancellor of modern times”.

However, he did introduce the triple lock, which the charity Age UK says has “rebuilt the value of the state pension” and helped “to improve the living standards of some of our poorest pensioners”.

The state pension trip lock guarantee was a Lib Dem policcy. Photograph: Rosemary Roberts/Alamy

That said, the triple lock was actually the Liberal Democrats’ baby: it was a key demand when the party negotiated the formation of the coalition government with the Conservatives. As a result, many Lib Dems claim the policy as theirs.

The triple lock guarantees that each year, the state pension will rise by whichever of three figures is the highest:
inflation, based on the consumer price inflation (CPI) figure for September of the previous year; or
the average increase in wages during the May to July period of the previous year; or
2.5%.

It was announced in the June 2010 budget, fully took effect in 2012, and has been consistently popular with many on the left. All of which adds extra spice to the speculation about whether it will be a Labour chancellor that gets rid of it.

It’s a big deal for millions of people

The triple lock affects anyone living in the UK who receives the state pension, including those on the old system (who reached state pension age before 6 April 2016)

This year, more than 12 million people enjoyed a state pension boost worth up to £575 a year that took effect from 6 April after the basic and new state pension were upped by 4.8% as a result of the triple lock. The relevant CPI rate was 3.8% and the average wage increase was 4.8%, so the latter was used.

That lifted the full rate of the new state pension from £230.25 to £241.30 a week. The full basic state pension rose from £176.45 to £184.90 a week.

Lots of people think it needs to go

There has been a great deal of discussion about the affordability and fairness of the triple lock.

The government-backed MoneyHelper website points out that, courtesy of the triple lock, the state pension increased by 10.1% in 2023, 8.5% in 2024, 4.1% in 2025, and 4.8% in 2026, “costing billions”.

Last year, the government’s economics watchdog, the Office for Budget Responsibility, said the triple lock “has cost around three times more than initial expectations” because of economic volatility.

On Thursday, the Institute for Fiscal Studies (IFS) thinktank said the state pension bill this year is expected to hit £154bn. It said spending is now £16bn a year higher than it would have been if the triple lock had not existed.

Last year, the OBR said the triple lock had cost about three times more than initial expectations. Photograph: Bank of England/PA

The IFS estimates that by 2050, keeping the triple lock would probably cost about £20bn a year in today’s terms – but the “high uncertainty” means the actual bill could be anywhere between £5bn and £40bn a year.

Earlier this year, the Resolution Foundation thinktank did not mince its words, branding the triple lock “a terrible policy”.

Supporters say it is vital for maintaining the value of the state pension – particularly for future pensioners, many of whom do not have access to the generous workplace schemes that many older people were able to join and are not saving enough for their retirement..

We may find out more next month

The chancellor, John Healey, could say something about the triple lock in his budget on 28 October.

Last week, Andy Burnham’s former economic adviser, Jim O’Neill, said the bond markets – which have the power to make or break governments – would respond favourably if he were “to take credible action to deal with the excesses of the triple lock or the excesses of welfare spending”.

Legally, the government is only required to increase the state pension in line with the average increase in wages.

“This means they could decide to scrap the triple lock in the future. But, as this would be a very political decision, it’s unlikely to be an overnight change,” says the MoneyHelper site.

The chancellor, John Healey, could axe the triple lock or put forward an alternative. Photograph: Matthew Horwood/PA

In theory, Healey could set out a timetable for change and/or put forward an alternative – for example, moving to a “double-lock” system, or linking to just prices or earnings, or something else that aims to smooth out the volatility.

In the coming weeks, we will also find out what next April’s state pension rise will be – and that may give fresh impetus to the debate.

The wages figure that is one of the three triple lock components will be announced on Tuesday, while the September CPI inflation figure will be published the week before the budget.

The April-June wages figure (announced last month) was 4.1%, while the most recent CPI inflation figure, for July, was 2.9%.

Let’s say the wages figure for May to July also comes in at 4.1% – and that’s the figure used – then that would add £9.90 a week to the full new state pension, lifting it to £251.20.