Political parties make commitments to pension triple lock, but what has it achieved and why has it provoked controversy?

Chancellor Jeremy Hunt recently confirmed that the triple lock pension system will be retained if the Conservatives win the next general election this year.

It’s a move that can be seen as a mini u-turn, as it has been believed that Hunt has doubted the system before manly due to the costs involved.

He has said that triple lock would be paid for by growing the economy.

While Labour have also said that it is also committed to keeping the triple lock system, so far Sir Keri Starmer has stopped short of confirming that it will be included in the party’s manifesto for the election.

The Liberal Democrats have also said that the triple lock will stay in place, which could have some significance if there was to be a hung parliament.

 

What is the triple lock pension?

The triple lock guarantees that the state pension will rise by the highest total out of average earnings, inflation or a rise of 2.5%.

It was brought in by the coalition government in 2010 to ease financial pressures on pensioners.

Inflation has fallen to 3.4% in the year to February compared with 10.4% for the same period last year, which makes it easier for the Conservatives and Labour to commit themselves to the triple lock system.

Every April it is decided what the increases in the state pension will be for the UK’s 12 million retirees.

What does this mean for you?

 

What is the current state pension total?

This year the state pension has been linked to the average earnings part of triple lock, as wages have increased to cope with rising inflation over the past two years.

So there is to be an 8.5% increase in the state pension, meaning that the flat rate state pension for those who began to claim it after April 2016 has now risen to £221. 20 per week from £203.85 a week during the last financial year.

This will mean a pension rise of over £900 per year in what is a significant development, as so many retirees are solely reliant on the state pension.

While those who reached state pension age before April 2016 will receive £169.50 per week, a rise from £156.20 a week.

Your entitlement to a state pension is based on your national insurance payment records.

Overall 30 years of national insurance contributions are necessary for you to receive the full state pension, this rises to 35 years of qualifying national insurance payments for the new full state pension

Men who were born after April 6 1951 and women who are born after April 6 1953 are eligible for the new state pension, where you would  have to have paid at least ten years of national insurance payments to receive any state pension at all.

 

Why has triple lock caused so much controversy?

The triple lock state pension pledge has caused many storms, as the benefit increases have created more of a strain on the public finances as the population in the UK is getting older leaving more pensioners to provide for.

Official figures have showed that a £7.1 billion deficit is expected in the public finances for 2024/25, and the bill for the triple lock is a major reason for the shortfall.

Last year the Institute of Fiscal Studies (IFS) released a report which revealed that the cost of triple lock has increased by £1 billion per year.

 

It was also found that the if the triple lock system was never introduced and the state pension had risen in line only with inflation, then for the last financial year the weekly pension would have been worth £180 compared to the just under £204 per week.

Looking ahead the IFS said that the future costs of the state pension could push spending up by anything between £5 billion and £45 billion per year, as the pensioner population continues to grow.

As there are flexibilities within the triple lock system it can be hard to predict just what a pensioner will receive as part of a full state pension, and also what the cost to the government will be.

With the state pension rising this could mean many pensioners will have to pay income tax, cutting into their limited finances.

There have been some suggestions on how to replace the triple lock, for example having a double lock where wage growth would not count towards the state pension.

Yet others have said that the levels of wage growth should be the sole measure of a state pension, to keep it in line with general income trends.

Other opinions have been to lower the 2.5% rise clause to reduce spending.