Major change to State Pension would scrap triple lock 'to make increases fairer'

A major change in the way State Pension increases are worked out has been proposed. It would see the triple lock system scrapped completely in favour of a more streamlined approach aimed at making the increases fairer.

The DWP's current triple lock agreement means the State Pension rises each year by the highest of three factors: the Consumer Price Index inflation figure for September, May-July earnings growth figure or a default minimum of 2.5 per cent. But an investment expert has proposed what he calls a "simple reform" to make the system more equitable.

It comes as the long-term sustainability of the triple lock has been questioned following significant increases in recent years, including a record 10.1 per cent rise last year based on inflation and an 8.5 per cent increase this year based on pay growth.


Mike Deverell, Investment Manager at Equilibrium Financial Planning, said: "The triple lock will probably need reforming sooner rather than later but the main parties are reluctant to do anything because it is a vote winner. It will only become more costly as the population ages and the proportion of pensioners to workers increases.

"A simple reform option would be to move to CPI (price inflation) only, perhaps with a cap - for example, pensions to rise in line with inflation up to a maximum of five per cent", he told the Express. "That would remove issues such as during the pandemic when pensions went up 2.5 per cent even though inflation was near zero and wages were falling. That felt a little unfair to the younger generation."

He also forecast how much the State Pension could increase next year under the triple lock. Mr Deverell explained: "CPI inflation has dropped to 2.3 per cent. It may creep back up a bit later this year but most forecasters, including the Bank of England, expect it to remain below 3 per cent for the remainder of 2024.

"Meanwhile, on the latest reading, wage growth was at around 5.7 per cent. It has come down a bit from around 8 per cent last year, but seems likely to remain above price inflation for a while yet. Therefore, it is very possible that pensions will rise in line with wage inflation next year, rather than price inflation. In other words, pensioners will get an above-inflation increase, perhaps as much as 5 per cent."

With the most recent hike from April 2024, the full new State Pension now stands at £221.20 weekly, and the full Basic State Pension at £169.50. You can find how much State Pension you are on track to receive using the Government's State Pension forecast tool.

The future of the State Pension also faces questions amid suggestions that National Insurance might be axed. Work and Pensions Secretary Mel Stride was quizzed by a Government committee this past week about whether eliminating the tax would lead to a £5 or £6 weekly drop in the State Pension, equating to £260 or £312 annually.

He responded to the Work and Pensions Committee saying that while the Government harbours "aspirations" to do away with National Insurance, the implications for people's finances are currently "hypothetical questions."

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