There were fresh calls this week for the state pension \u201ctriple lock\u201d to be ditched as debate rages over whether the UK can afford it.<\/p>\n
The triple lock guarantees that the state pension goes up each year in line with inflation or wage increases or 2.5% \u2013 whichever is the\u00a0highest.<\/p>\n
In the latest intervention, the British Chambers of Commerce has called for the policy to be scrapped<\/a>, and the money saved to be put towards tackling the youth unemployment crisis.<\/p>\n Meanwhile, a leading economic thinktank has added fuel to the fire by reminding everyone of the multibillion-pound cost of the policy.<\/p>\n 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:<\/p>\n It was introduced by George Osborne (sort of)<\/p>\n A few years ago, a Guardian opinion piece<\/a> claimed that George Osborne \u2013 who served as Conservative chancellor from 2010 to 2016 \u2013 was \u201cthe most deliberately, intentionally, knowingly poverty-causing chancellor of modern times\u201d.<\/p>\n However, he did introduce the triple lock<\/a>, which the charity Age UK says<\/a> has \u201crebuilt the value of the state pension\u201d and helped \u201cto improve the living standards of some of our poorest pensioners\u201d.<\/p>\n The state pension trip lock guarantee was a Lib Dem policcy. Photograph: Rosemary Roberts\/Alamy<\/p>\n That said, the triple lock was actually the Liberal Democrats\u2019 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<\/a>.<\/p>\n The triple lock guarantees that each year, the state pension will rise by whichever of three figures is the highest: It was announced in the June 2010 budget, fully took effect in 2012, and has been consistently popular with many on the left. All\u00a0of which adds extra spice to the\u00a0speculation about whether it will be a Labour chancellor that gets rid of it.<\/p>\n It\u2019s a big deal for millions of people<\/p>\n 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)<\/p>\n This year, more than 12\u00a0million people enjoyed a state pension boost worth up to \u00a3575 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.<\/p>\n That lifted the full rate of the new state pension from \u00a3230.25 to \u00a3241.30 a week. The full basic state pension rose from \u00a3176.45 to \u00a3184.90 a week.<\/p>\n Lots of people think it needs to go<\/p>\n There has been a great deal of discussion about the affordability and fairness of the triple lock.<\/p>\n The government-backed MoneyHelper website points out<\/a> 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, \u201ccosting\u00a0billions\u201d.<\/p>\n Last year, the government\u2019s economics watchdog, the Office for Budget Responsibility, said the triple lock \u201chas cost around three times more than initial expectations<\/a>\u201d because of economic\u00a0volatility.<\/p>\n On Thursday, the Institute for Fiscal Studies (IFS) thinktank said the state pension bill this year is expected to hit \u00a3154bn. It said spending is now \u00a316bn<\/a> a year higher than it would have been if the triple lock had not existed.<\/p>\n Last year, the OBR said the triple lock had cost about three times more than initial expectations. Photograph: Bank of England\/PA<\/p>\n The IFS estimates that by 2050, keeping the triple lock would probably cost about \u00a320bn a year in today\u2019s terms \u2013 but the \u201chigh uncertainty\u201d means the actual bill could be anywhere between \u00a35bn and \u00a340bn a year.<\/p>\n Earlier this year, the Resolution Foundation thinktank did not mince its words, branding the triple lock \u201ca terrible policy<\/a>\u201d.<\/p>\n Supporters say it is vital for maintaining the value of the state pension \u2013 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\u00a0are not saving enough for their\u00a0retirement..<\/p>\n We may find out more next month<\/p>\n
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%.<\/p>\n