Whether the triple lock is a “good thing” is debated, as it benefits pensioners by increasing their State Pension to keep up with inflation and earnings, but it creates significant uncertainty for government finances and can increase inequality with working-age people. Pensioners benefit from higher payments, but critics argue the rising cost to taxpayers is not sustainable and that it may widen the gap between pensioners and the working-age population.
Benefits of the triple lock
- Protecting pensioners’ income: The triple lock guarantees the State Pension will increase by at least 2.5% or the highest of inflation (CPI) or average earnings growth. This protects pensioners from the rising cost of living.
- Ensuring a decent standard of living: By increasing pension payments faster than if they just tracked inflation or earnings, the triple lock has significantly increased the value of the State Pension, especially relative to average earnings.
- Sharing in economic growth: The inclusion of earnings growth means pensioners can benefit from increased national prosperity, similar to how they would if they were still working.
Criticisms of the triple lock
- Financial uncertainty: The triple lock can make public finances unpredictable because the final increase depends on the highest of three potentially volatile figures, making it difficult for the government to budget for future pension spending.
- High cost to taxpayers: The triple lock is expensive for the government, meaning the cost is ultimately paid for by taxpayers, especially in an aging population where the ratio of pensioners to working people is increasing.
- Increased inequality: Critics argue that the triple lock has made pensioners, on average, better off than many working-age families, who are often more likely to be in “fuel stress” or other forms of hardship, contributing to a growing gap in living standards.
There are some solutions to the current situation, which could include
- abolishing the triple lock entirely,
- stopping it after the State Pension reaches a certain level,
- changing to a double lock
- or linking the amount of Pension to set levels of retirement income, which could be predicted by think-tanks (like Pensions UK), making the cost to the Government more predictable.
