An additional £11 billion per year is spent on state pensions as a result of the triple lock, compared to what spending would have been if growth had been in line with either prices or earnings, according to the Institute for Fiscal Studies (IFS).
State financial support to pensioners is greater as a result of the triple lock, the IFS said.
Had the values of the basic state pension and the new state pension instead been determined by inflation or earnings growth since 2011, they would both now be around 11% lower, with a full new state pension worth around £180 per week and the basic state pension worth around £140 per week, the report said.
The analysis also indicates that the triple lock could potentially increase spending by anywhere between a further £5 billion and £45 billion per year, in today’s terms, by 2050.
This projected range is big because of the uncertainty over the path of the state pension that the triple lock creates, making it difficult for either the Government or future pensioners to plan their finances, the IFS said.
If the triple lock is kept in place indefinitely, the state pension could potentially be worth between £10,900 to £13,400 per year in today’s terms by 2050, the IFS estimated.
It added that this uncertainty makes it harder for people to plan for retirement.
The triple-lock safeguard means that the state pension tends to increase every April, in line with wage growth, price inflation or 2.5% – whichever is higher.
The IFS said that earnings growth figures released next Tuesday will be likely to determine next April’s increase in the state pension for the UK’s 12 million pensioners.
This is because it is typically used as the measure of earnings for the pensions triple lock – and because it is also likely to be above both 2.5% and CPI (Consumer Prices Index) inflation in September, it added.
The report said data covering April to June 2023 showed annual earnings growth of 8.2%.
It continued: “Unless this falls dramatically in the next data release, or unless CPI inflation (currently at 6.8%) makes a sharp surprise upward turn in September, state pensions will rise next April in line with the earnings growth figure announced on Tuesday.”
The new IFS report was released as part of the Pensions Review in partnership with abrdn Financial Fairness Trust which funds research to help improve living standards.
Heidi Karjalainen, one of the authors of the report and a research economist at the IFS, said: “The triple lock makes it especially hard to know how much you might receive from a state pension and how much the state pension will cost the state in the future.
“An additional real risk is that retaining the triple lock for too long increases state-pension spending so significantly that it leads to insurmountable pressure for a much higher state pension age. This would particularly affect people with poorer health who struggle to remain in employment until they reach state pension age.”
A Department for Work and Pensions spokesperson said: “The Government is committed to the triple lock. As is the usual process, the Secretary of State will conduct his statutory annual review of benefits and state pensions in the autumn, using the most recent prices and earnings indices available.”