The pension triple lock won’t ‘last forever’, warns Labour MP
A Labour MP has admitted that the pension triple lock won’t “last forever”, as the Budget fails to mention an end to the controversial scheme.
Speaking live to CityAM‘s Christian May and Alys Denby, Chris Curtis, MP for Milton Keynes North, said that the “triple lock inevitably cannot last forever”.
He said: “That is a mathematical fact…you cannot have a pensions bill that on average rises faster than wages indefinetely.
“Eventually this country is going to have to start grappling with that question.”
The state pension triple lock was introduced in 2010, promising to increasing the basic state pension each year by the highest of either 2.5 per cent, inflation or average earnings growth.
But macroeconomic volatility since the early 2010s has raised the cost of pensions by far more than expected, with Brexit, the pandemic and energy price rises ratcheting up its value.
The Office for Budget Responsibility estimates the state pension will cost around £15.5bn more per year by the end of this parliament than if it had been linked to average earnings since the early 2010s.
Pensions rising next April
While the triple lock has proven popular with the public, it has added significant pressure on fragile public finances, with the ongoing commitment meaning adjustments to other areas of state spending.
However, Curtis noted the government is upholding to its 2024 manifesto commitment to not raise the triple lock during this parliament.
He said: “We are sticking to that manifesto commitment to the triple lock…I think that is the right thing to do.”
Curtis added the decision to maintain the lock would “keep pensioners out of poverty”.
Brits receiving the full new state pension will see their pension rise by as much as £550 from next April under the triple lock pledge, including people who reached the state pension age after April 6 2016.
According to the Treasury, the increase is £120 higher than if it had been pegged to inflation.
Jon Greer, head of retirement policy at Quilter, said: “This issue puts the triple lock back in the spotlight albeit the government has committed to maintain it until 2029.
“The formula…was introduced to protect pensioners during low growth and reverse decades of decline in pension value.
“Today it acts as a rigid mechanism that drives up spending regardless of affordability or fairness.”
Salary sacrifice slash
While pensioners managed to dodge the worse of the Budget blows, with over 65s even exempt to the cash ISA ceiling slash from £20,000 to £12,000, employees will see their pension contributions through salary sacrifice be capped.
The tax-free contribution has been pared back to £2,000 per employee per year, from April 2029, with Reeves arguing the scheme does not benefit those on the minimum wage.
Reeves said in her Budget speech: “Salary sacrifice for pensions, which was intended to be a small part of our pension system, is forecast to treble in costs from £2.8bn to £8bn by 2030.”
She noted the schemes primarily benefit high earners, particularly “those in the financial services sector putting their bonuses into pensions tax-free”, while minimum wage earners are left out in the cold.
The decision is expected to raise an additional £4.7bn in the 2029-30 financial year, and £2.6bn in the 2030-31 financial year.