State pension triple lock could be reduced to 'double lock' to 'keep it affordable'

The new Labour Party government faces a "quandary" over the Triple Lock, experts have warned. While the Labour Party has vowed to keep the Triple Lock after gaining power from the Conservative Party in the General Election last week, experts have warned them over its affordability.

Gary Smith, Partner in Financial Planning at wealth management firm Evelyn Partners, said: "The state pension - at its current full rate of £11,502 a year – will remain on a collision course with the personal allowance, the amount of income which can be earned tax-free each year. That is currently frozen at £12,570 until 2028, a timeline Labour has said it will stick to.

"This raises the prospect that pensioners will soon be taxed on their state pension income, and the OBR has forecast that the state pension will overtake the personal allowance level by 2027. But if inflation or wage growth gives an unexpected boost to the state pension, this could happen sooner.

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"That would present the Government with a major policy quandary, possibly on the eve of the next general election shining a harsh light both on the affordability of the triple lock and on the stealth tax rises effected by the long-term freeze in personal tax thresholds."

David Piltz, CEO of Gallagher’s Benefits & HR Consulting Division in the UK, said: "The government must balance supporting pensioners without letting costs spiral, especially during periods of economic instability. But regardless of who wins the election, pensioners will be pleased to know they can count on the triple lock for the next cycle.

“The new "triple lock plus" proposed by the Conservative Party will raise the nil-rate tax threshold for pensioners and has upped the ante, meaning most pensioners won’t pay tax on their basic state pension, even if it increases. While this seems positive, it raises concerns about intergenerational fairness if worker tax thresholds don’t rise simultaneously and risks making state pensions unsustainable.

“The problem is that reforming the system is politically sensitive with limited options. A double lock system, tying increases to average earnings or inflation, could protect pensioners from rising living costs while stabilizing the economy. However, there’s no guarantee this will keep pensions affordable long-term. Alternatively, capping annual pension increases could help manage spending while continuing to support pensioners.”