Abolishing pension triple lock would be ‘toxic’, ex-ministers warn

Whoever wins the next election must protect the state pension triple lock, former pensions ministers have warned.

The future of the policy has been thrown into doubt amid fears that funding the state pensions of a growing older population will drain the public finances.

Sir Keir Starmer, who is on course to lead the next government, this week told i that while he strongly believes in the triple lock, he could not guarantee it will be in Labour’s election manifesto.

This followed a warning by the Institute for Fiscal Studies that the policy is only sustainable in the short-term and will need to be changed to secure the long-term future of the state pension.

But policy experts believe that, in an election year, no senior politician will risk talking about scrapping it because this would be disastrous with voters – as Theresa May discovered in the 2017 election campaign.

Former ministers and MPs have told i that the triple lock – which ensures the state pension rises by the highest of inflation, average earnings or 2.5 per cent a year – is sustainable in the long-term, and that any suggestion of means-testing pensions would be “toxic” and should be avoided.

Thérèse Coffey, former work and pensions secretary, said the triple lock “absolutely” was sustainable in its current form, adding: “I cannot think of any politician that would vote to abolish it, or even means test it.There is quite a scurrilous campaign suggesting the latter on the back of the anti-fraud measures in the Digital Bill.”

The former Cabinet minister suggested pension companies should be more proactive in seeking better returns for defined contribution members, however.

Nigel Mills, a Conservative MP and member of the Work and Pensions Select Committee, said the triple lock should be kept in place but that the mechanics of it could be tweaked to make it more affordable – such as calculating the rate from a three-year rolling average of both inflation and earnings.

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He said it would be “too toxic” for politicians to talk about scrapping the triple lock in an election year.

“We don’t have a generous state pension,” he added. “I cannot see a realistic proposal that anybody would make that the state pension should not go up by inflation. We restored the earnings link when we first got into office. It is right that pensioners’ income rises in line with earnings.

“The problem with the pension going up in line with earnings and inflation, whichever is higher, is that it can get out of sync – and the state pension goes up by more than both. That is a quirk that wasn’t envisaged [when the triple lock was created].

“You could have a three-year rolling average of both measures where the state pension still goes up but doesn’t rise by more than both.

“Whoever is in government after the next election should probably do it, and the opposition should just keep their mouths shut.

“Means-testing is just horrible because it means people save a smaller amount. As a society we have a real problem with people not saving enough already.”

Steve Webb, who served as a Liberal Democrat pensions minister in the Coalition government, said the UK has one of the lowest state pensions in the developed world, partly because the system was based on both state and workplace pensions, which are often very modest.

Mr Webb, partner at pension consultants LCP, added that although recent headline increases in the state pension appear large, they were only keeping pace with inflation, which soared between 2021 and 2022.

This meant that over the past two years, the full new state pension has risen by £35 a week, but £31 of that increase was it keeping pace with inflation.

Mr Webb said means-testing would be a “nuclear option” and penalise people who had saved voluntarily for their old age.

He added: “Although rates of state pension have risen sharply in recent years, so has the cost of living and so has government revenues.

“We still have one of the lowest state pensions in the developed world, and it is hard to see why one of the world’s richest countries cannot afford a decent state pension.

“Whilst it is likely that we will have to work longer in future before we receive our state pension, anything more drastic such as means-testing would be totally unacceptable.

“We have a voluntary system of workplace pensions, and if people who had saved on top of the state pension were penalised, millions might opt out, destroying the progress that has been made on automatic enrolment.

“The key to paying for pensions is to have a large tax base with more of the population of working age fit and able to work, paying into the system and helping to fund pensions”.

However Baroness Altmann, who was pensions minister under David Cameron, said the triple lock was no longer sustainable.

She added: “Politicians should consider increasing the number of years required for a full state pension, so that costs can be controlled in a more effective way.

“If people have not lived or worked in the UK for, say, 45 or 50 years, then they do not get a full state pension.

“It could also be that the Government makes a charge to buy added years, but this should be on more commercial terms than the current system, which is an excellent deal for those buying the years, but not good value in most cases for taxpayers.

“I think that the triple lock no longer makes sense and that either the state pension should be increased in line with a double lock of best of earnings and prices, or could be left to the discretion of the Government of the day each year.”

She suggested that add-on tax-free pensioners’ benefits, such as winter fuel payments, should be rolled into a higher state pension and become taxable, so that they are not “benefiting the wealthiest pensioners at the expense of everyone else”.

Lady Altmann added: “We need a full national review, cross-party, of all aspects of pensioner support, so that we do not keep having political tinkering with state pensions.

“They should continue to be the bedrock of our social welfare system, with a basic lowish level of pension, topped up by those who wish to set money aside for their future while working.”

However, past attempts to reform or even scrap the triple lock have cost votes – as Mrs May found out when she suggested switching to a double lock during the 2017 election campaign, which contributed to her losing her majority.

Theo Bertram, incoming director of the Social Market Foundation and a former No10 policy adviser under the Blair and Brown governments, said: “In my view, political fear is the only thing keeping the triple lock alive.

“Theresa May was the last Prime Minister to be honest about the fact that it’s unsustainable (advocating a ‘double lock’ in 2017) and things didn’t end well for her.

“That’s frightened off every Tory leader since then and Labour don’t want a political gap, so everyone is going along with this fiction. However at some point economic reality will intervene, as it always does.”

Last month, Chancellor Jeremy Hunt confirmed that keeping the triple lock would be in the Conservative manifesto and the pledge would apply to the whole of the next Parliament if the Conservatives win the general election.