Treasury Officials Discussing Potential Break from Pensions Triple Lock

Treasury officials are discussing a one-off break from the pensions triple lock that could save £1bn by preventing a bumper 8.5% increase in the state pension next year.

Considering Stripping Out Public Sector Bonuses

The government is considering stripping out public sector bonuses that were awarded to workers to prevent strikes over the summer from the calculation that determines the annual rise in pensions.

Potential Adoption of Earnings Link

Ministers will now consider whether to instead adopt an earnings link that tracks the underlying level of pay growth, which could mean pensions increasing at the lower level of 7.8% from April 2024.

Controversy Surrounding the Change

Any change to the way the state pension is calculated would be controversial because the Conservatives pledged in their last election manifesto to abide by the formula, which guarantees an increase in line with average earnings, inflation or 2.5%, whichever is highest.

Justification for “Tweaking” the Calculation

However, government insiders believe they could justify “tweaking” the way that they calculate the annual increase as a one-off, as otherwise pensions would continue to rise far more quickly than wages, which could be regarded as unfair by working people.

Previous Suspension of the Triple Lock

The triple lock was temporarily suspended earlier in the parliament when the end of lockdown restrictions led to double-digit earnings growth.

Refusal to Commit to Keeping the Triple Lock

Rishi Sunak refused on Sunday to commit to keeping the pensions triple lock, which was introduced in 2011, in the next manifesto as he grapples with how to fund tax cuts demanded by his own MPs.

Labour’s Position on the Triple Lock

In remarks that have offered hope to some Tories that there could be a basis for cross-party talks on the issue, Labour’s deputy leader, Angela Rayner, refused to commit her party to the policy at the TUC conference in Liverpool.

Impact on State Pension Cost

The Institute for Fiscal Studies (IFS) said the figures meant the state pension, set to be confirmed by the chancellor, Jeremy Hunt, at next month’s spending review, would cost £2bn more than budgeted in 2024–25, taking the annual bill close to £140bn for the UK’s 12 million pensioners.

Call to Ditch the Triple Lock

The former Conservative leader William Hague said it was time to ditch the triple lock – suggesting the cost was “unsustainable” and that the increases were “not something that can go on for ever” without large tax rises or big reductions in benefits for working age families.

Independent Review with Cross-Party Support

Rupert Harrison, who sits on the government’s economic advisory council, said on X, formerly known as Twitter: “It’s time for an independent review with cross party support & concluding after the next election.”