A former pensions minister who helped create the state pension triple lock has warned the policy will not exist within a generation as questions over the future of payments continue.
Sir Steve Webb, who served as pensions minister during the coalition Government and signed off the triple lock in 2010, said the measure could be replaced with a system linking payments to average wages.
The former minister, now a partner at pensions consultancy LCP, told The Telegraph: “[The triple lock] won’t last forever, because logically it would go up higher than prices and earnings in the long term. There might come a point when even pensioners want money spent on other things. It won’t be here in a generation.”
His warning comes as debate continues over the policy’s future, with Labour’s new pensions minister previously advocating its replacement and Conservative party leader Kemi Badenoch suggesting means-testing for state pensions.
Under the triple lock, the state pension rises by the highest of inflation, wage growth or 2.5pc each year. Chancellor Rachel Reeves has indicated the policy will remain in place until at least 2029.
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The state pension triple lock will likely not exist in the years to come, a former pensions minister claims
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However, uncertainty surrounds its longer-term future, with Prime Minister Keir Starmer’s spokesman unable to guarantee the triple lock would exist in its present form for the whole of the current parliament.
Pension experts and ministers have long described the policy as unsustainable. Webb suggested the triple lock could be replaced with pensioners receiving as little as a third of average wages.
“You’d have to set a target [move off the triple lock] when the state pension hits, for example, a third of average wages,” he said. He acknowledged the political challenges in making such changes, noting: “The politics are very difficult – no one wants to be the one who switches it off.”
Webb said while the triple lock was “not perfect” it “does a job”. He explained the policy had helped reverse decades of decline, saying: “We had 30 years of decline up to 2010, when the state pension was linked to prices, meaning it was falling behind what people earned, and pensions are about replacing earnings.”
Older Britons are worried about the future of the state pension triple lock
PA
The cost of the state pension reached £124billion in 2023 to 2024, according to Office for Budget Responsibility (OBS) estimates. This figure is set to rise dramatically, with forecasts showing it will hit £158billion by 2028 to 2029.
This £34billion increase is attributed to the triple lock policy. “Then we’ve had 15 years of recovery. I wouldn’t be as crude to say we need another 15 years [of the triple lock], but it’s a slow process,” Webb said.
From 1975 to 1979, the state pension increased by the highest of earnings or price inflation. The Conservative government changed this in 1980, moving to increase pensions only in line with prices.
This price-linked system continued until 2011, leading to a significant decline in pension values compared to earnings. The basic state pension fell from 26pc of average full-time earnings in 1979 to around 16 per cent between 2000 and 2010.
The basic state pension fell from 26 per cent of average full-time earnings in 1979 to around 16 per cent between 2000 and 2010.
George Osborne introduced the triple lock in 2011 to 2012 to address this decline.
LATEST DEVELOPMENTS:
Webb oversaw the implementation of the policy during his time as pensions minister.
Currently, the new full state pension currently stands at £221.20 per week. This will increase by 4.1 per cent to £230.25 in April.
The new state pension has reached 30pc of average earnings, largely due to the triple lock policy.
This represents a higher level than the basic state pension achieved at any point since at least 1968.