By Andy Silvester
The cost of the ‘triple lock’ pension is set to rise another £2bn thanks to higher than expected wage growth, putting further pressure on the government to reconsider its flagship pensions commitment.
The state pension increases at the average rate of pay increases, inflation, or 2.5 per cent, whichever is higher.
This morning’s release from the Office for National Statistics pegs the first of those, average wage growth across the year, at 8.5 per cent.
Assuming the government doesn’t leech on its pre-existing commitment, that will mean the state pension increasing from £203.85 per week to £221.20, the Institute for Fiscal Studies (IFS) said this morning.
The IFS warned that the uptick would add a further £2bn to the cost of the nation’s pensions commitments from projections made just six months ago by the Office for Budget Responsibility.
“Since its introduction in 2010, the triple lock, together with the introduction of the new state pension, has significantly increased the generosity of the state pension relative to earnings,” a briefing by the organisation read.
“But this comes at a cost to public finances – the triple lock has added £11 billion to spending on the state pension in 2023–24 relative to price or earnings indexation.”
There is growing pressure on the government to ditch the triple-lock promise as it heads into the next election.
The policy, which was designed in a more benign inflationary and growth environment than currently seen, has become increasingly costly.
Critics say it is also broadening generational inequality.
Asked earlier this week about the commitment, Prime Minister Rishi Sunak said it was too early to “speculate” on manifesto policies.
