Will the Triple-Lock Pension Be Scrapped?

The UK is in the midst of an unprecedented economic crisis, built from the after-effects of numerous once-in-a-generation events. The UK’s withdrawal from the EU, coupled with the economic drought caused by the coronavirus pandemic, has left the nation in a weak financial state – one which has been worsened by market movements in recent months. These market movements have stoked fear regarding the state of our state pension – and the safety of the triple lock.

What is the Triple Lock?

The ‘triple lock’ describes a vital mechanism designed to protect the state pension against uncertain market movements. In principle, it ensures that the state pension – on which many retirees rely for essential provisions such as food and energy – does not get outpaced by inflationary growth.

Simply put, state pension payments increase annually. The amount by which they increase has a tangible impact on the affordability of living within certain means for those that receive it. The triple lock, then, sees the prospective annual increase track with the larger of three values: 2.5 percentage points of the existing state pension rate; the Consumer Price Index (CPI), or the average growth in annual wages. This allows pension payments to grow sensibly alongside national growth.

Inflation, and the New Conservative Government

But the triple lock has been troubled in recent months, as the rate of inflation has remained around or above 9% for an extended period of time – and at one point expected breach 13%. This makes for a large-scale increase in government expenditure on pensions.

Since Liz Truss’ ascension to Prime Minister, the government has faced new economic challenges – many of which have stemmed from the announcement of their own pro-growth agenda that intimated public spending cuts would pay for un-costed tax cuts. When asked if benefits expenditure would increase in line with the rising rate of inflation, Truss’ government initially refused to respond.

This sparked concern amongst experts and members of the public alike, being an implicit suggestion that the triple lock might not be safe. Retirees would need to rely more heavily on private financial planning solutions to plug the gap, and private pension funds – which themselves are bearing unique burdens due to government policy – would become sole income sources for many.

What the Future Holds

Chancellor Kwasi Kwarteng has since ruled out the possibility of the triple lock being scrapped, insisting that state pensions will be safe from any government spending cuts or budget re-tooling. But Liz Truss’ comments in the House of Commons have served to confuse more than clarify.

When pressed about the funding of tax cuts by Labour leader Kier Starmer, Truss insisted that public spending would not be cut – but did not elaborate further on how her controversial tax breaks would be funded. As such, the future is unclear for both the triple lock and the wider economy – with the average citizen expecting more financial difficulty on the way.