Questions grow over triple-lock as number of people on state pension climbs by 220,000
The long-term sustainability of the pensions triple-lock has been called into question yet again after new figures showed an extra 220,000 people were receiving the state pension.
According to data from the Department for Work and Pensions (DWP), 12.9m people were receiving the benefit in May 2024, a 1.7 per cent increase on the previous year.
Experts said the figures revealed the scale of the UK’s demographic challenge on the public finances, with an ageing population putting increasing strain on the state coffers.
In particular, experts said that the figures highlighted concerns about the long-term sustainability of the triple lock. Under this policy, the state pension rises each April in line with whichever is highest of inflation, average wage increases or 2.5 per cent.
Heidi Karjalainen, senior research economist at the Institute for Fiscal Studies (IFS), said the policy “ratchets up the value of the state pension relative to average earnings in a way that will ultimately be unsustainable for public finances”.
Recent forecasts from the OECD suggest that the policy will add around eight per cent of GDP to public debt by 2072-73, even though the state pension age is set to rise to 67 in 2028, up from 66 currently.
“While the policy is undeniably popular, it raises critical questions about fiscal sustainability,” Ian Cook, a chartered financial planner at Quilter Cheviot, said.
The government has committed to keeping the triple lock in place for at least the duration of this parliament. But Cook said that the ministers should consider alternatives as part of their ongoing review into the pensions system.
“Labour’s planned review of pensions and retirement savings now presents an opportunity to critically assess whether the triple lock remains appropriate in the long term,” he said.
“The government must navigate a complex balancing act which still protects the incomes of current pensioners while ensuring that the system remains fair and affordable for younger generations.”
Karjalainen at the IFS said it would be better for the government to set a target level for the state pension relative to average earnings, linking future increases to that level.
“This would provide more certainty for individuals in terms of how much they will receive from a state pension and how much it will cost the government in the future,” she said.
Caroline Abrahams, charity director at Age UK, said there was “no getting away” from the fact of an ageing population, but she said this also presented a “big opportunity” for people enjoy longer and more fulfilling lives.
“We shouldn’t forget that there are 1.5m people aged over 65 currently in paid employment, with countless more contributing by volunteering, caring and taking part in their local community,” she said.
A Government spokesperson said: “This Government is committed to the Triple Lock, with millions of pensioners set to see their yearly State Pension rise by up to £1,900 over the course of this parliament.”