What's the future of the state pension triple lock?
One thing pensioners can look forward to in 2024 is an 8.5% rise to the state pension in April, thanks to the triple lock.
But this increase is now more than double the latest inflation figure, adding fuel to the debate on whether the triple lock is sustainable long term.
The Institute of Fiscal Studies (IFS) has said the triple lock should be scrapped and instead tied to earnings in a move that would save taxpayers billions of pounds.
Here, we explain how the triple lock has increased the amount you get, what the IFS proposes, and how to check your state pension forecast.
What does the triple lock do?
Brought in by the Conservative-Liberal Democrat coalition government in 2011, the triple lock guarantee means payments are increased each year by whichever rate is higher out of:
- September’s Consumer Price Index (CPI) – a measure of inflation
- average earnings growth (as of July)
- a guaranteed minimum of 2.5%.
Despite speculation a lower figure would be used next year, during the Autumn statement, Jeremy Hunt confirmed the 2024-25 state pension would rise by 8.5%.
Here’s how the state pension has increased each year under the triple lock.
| Year | CPI | Average earnings | Guaranteed minimum | Which part of the triple lock kicked in? |
|---|---|---|---|---|
| April 2012 | 5.2% | 2.7% | 2.5% | CPI |
| April 2013 | 2.2% | 1.5% | 2.5% | Guaranteed minimum |
| April 2014 | 2.7% | 1.2% | 2.5% | CPI |
| April 2015 | 1.2% | 0.6% | 2.5% | Guaranteed minimum |
| April 2016 | -0.1% | 2.9% | 2.5% | Average earnings |
| April 2017 | 1% | 2.5% | 2.5% | Guaranteed minimum |
| April 2018 | 3% | 2.3% | 2.5% | CPI |
*triple lock suspended due to wage growth and replaced with ‘double lock’.
- Find out more:Chancellor confirms bumper state pension increase
How much is the state pension worth in 2024-25?
If you're entitled to the full level of the new state pension you will get £221.20 a week from April 2024, up from £203.85 this year.
Pensioners who qualified for the state pension before April 2016 and receive the basic state pension will see their weekly payments rise from £156.20 to £169.50.
- Find out more:how much state pension will I get?
Is the state pension sustainable?
In a report about the future of the state pension published in December, the IFS identified the main challenges facing the system and suggested a ‘four-point pension guarantee’ to fix it.
The main challenges include:
An ageing population: there are expected to be 25% more pensioners in 2050 than there are today. This will push up the cost of the state pension, which along with pension credit and winter fuel payment already comprises £132bn, or 5.1% of national income in the 2023-24 tax year. This could rise to 6.4% in 2050-51, according to the Office for Budget Responsibility.
Triple lock uncertainty: it could cost anything between an additional £5bn and £40bn per year in 2050 in today’s terms, due to not being able to predict what element of the triple lock will kick in.
State pension age: groups with lower life expectancy, including poorer people, do not benefit as much from the triple lock when the state pension age is increased.
Confusion and pessimism: a third of people do not think the state pension will exist in 30 years, and 38% think it will not keep up with inflation.
- Find out more: state pension age calculator
What could be the alternative?
Despite the challenges, the IFS said the state pension did not need ‘wholesale change’, but instead recommended four improvements.
1. Get state pension to a target share of median full-time earnings
The report stated there should be a government target level for the new state pension, expressed as a share of median full-time earnings.
When choosing the level, the government must consider the trade-off between a higher income of pensioners, and the public finance implications.
The full new state pension currently stands at 30% of median full-time earnings.
Increases in the state pension will then, in the long run, keep pace with growth in average earnings, which ensures that pensioners benefit when living standards rise.
The IFS said once a target is set, the government should legislate a pathway to meet it with a specific timetable.
2. Increase at least in line with inflation every year
The report stated that both before and after the target level is reached, the state pension should continue to increase at least in line with inflation every year.
During any period where average earnings growth is below inflation, such as a recession, the value of the state pension would rise in line with prices, until it reaches the target level again.
3. Keep it non-means-tested
The state pension is not currently means tested, unlike some European countries. But how much you get depends on how many qualifying years of National Insurance contributions or credits you have built up.
4. Keep state pension age increases reasonable
The report also recommended: ‘the state pension age will only rise as longevity at older ages increases, and never by the full amount of that longevity increase.’
In other words, as we live longer, there should be careful limits on how the state pension age rises along with it.
Currently, the state pension age is 66, rising to 67 by 2028, and to 68 between 2044-46.
The IFS added to increase confidence and understanding, the government should write to people around their 50th birthday stating what their state pension age is expected to be. Their state pension would then be guaranteed 10 years before they reach it.
- Find out more:how much will you need to retire?
What does the government think?
In response to the IFS proposals, the Department for Work and Pensions said: ‘We want to ensure the state pension remains the foundation of income in retirement for future generations in a way that it is sustainable and fair.’
'Our recent State Pension Age review concluded that a universal state pension age remained the best system, providing simplicity and clarity for people, and we also remain committed to the principle of providing 10 years notice of changes to state pension age, enabling people to plan effectively for retirement.’
It said the triple lock meant there were 200,000 fewer pensioners in absolute poverty compared to 2009-10.
- Find out more:how do I qualify for state pension?
What is the future of the triple lock?
With the UK heading into an expected election next year, the triple lock is likely to be a taking point once again.
Although there was cross-party support for the triple lock in the 2019 general election, so far only the Liberal Democrats have committed to protecting it in the next Parliament.
Neither the Conservative or Labour Party have confirmed whether the triple lock will remain a manifesto commitment.
How to check your state pension forecast
You'll need at least 35 qualifying years of NI contributions to qualify for the full new state pension, and at least 10 years' worth to get anything at all.
If you reached the state pension age before April 2016, you'll need 30 years of contributions to get the full basic state pension.
For anyone who hasn't yet reached the state pension age, you can use an online government tool to check your state pension forecast, which will tell you how much you can get, when you can start receiving payments, and whether you're able to increase them.
- Find out more:your state pension forecast explained
