The Department for Work and Pensions (DWP) is considering changes to the state pension triple lock that could save the government £19 billion annually by the mid-2030s, according to a recent report from the Intergenerational Foundation. This proposal involves linking the state pension increases solely to inflation for the next four years, rather than the current triple lock system.
The triple lock, which guarantees pension rises based on the highest of inflation, wage growth, or 2.5%, was originally introduced to protect pensioners’ income. However, the think tank argues that maintaining it indiscriminately benefits many well-off pensioners while placing a heavy financial burden on younger generations facing stagnant wages and rising living costs.
By switching to inflation-only increases until 2030-31 and then applying a combined average of inflation and wage growth, the government could save £19 billion a year by 2035. These savings could climb to £28.5 billion by 2040 and £38 billion by 2045.
READ MORE: DWP Claimants Concerned Over Rejection Surge Following Access to Work Overhaul
READ MORE: Rachel Reeves Confirms Cancellation of 5p Fuel Duty Rise
Importantly, the foundation suggests allocating part of these savings to support low-income pensioners through a new supplement of £30 per week (£1,560 annually). This targeted payment would be available to those receiving pension credit, which currently elevates income to £238 per week for single pensioners or £363.25 for couples. The supplement would cost around £1.9 billion annually by 2035, representing 10% of the projected savings.
Conor Nakkan of the Intergenerational Foundation emphasized the policy’s shortcomings: “The triple lock may have been introduced with good intentions but has become an expensive and poorly targeted program. It provides substantial increases to all pensioners, including many financially secure individuals, while younger generations struggle with high living costs and tax pressures.”
The irregular costs associated with the triple lock also create increased uncertainty for the Treasury. Tom Selby from investment platform AJ Bell noted, “The unpredictable nature of the annual pension increase exposes the Treasury to significant fluctuations in expenditure.”
This new approach aims to balance fiscal responsibility with fairness, focusing resources on those most in need while easing pressure on public finances.