The ‘expensive and wasteful’ triple lock on state pensions should be scrapped to save £650million a year, according to a think tank with close links to Labour.
The Resolution Foundation branded the triple lock a ‘terribly designed policy’ that risked ‘economic harm’ the longer it continues.
The triple lock sees state pensions increase in line with whichever is highest out of average earnings growth, inflation or 2.5 per cent.
It was introduced under the Tory-Liberal Democrat coalition government as a means of trying to lift older people out of poverty.
But some economists have raised concerns about the financial sustainability of the triple lock, due to the UK’s aging population and the fact Britons are living longer.
Meanwhile, economic volatility in the wake of the Covid pandemic and Ukraine war has seen large increases under the triple lock in recent years.
This has pushed up spending on state pensions and increased concern about the parlous state of the public finances.
In a new analysis, the Resolution Foundation – often described as Chancellor Rachel Reeves’ ‘favourite think tank’ – called for the triple lock to be replaced with ‘a smooth earnings link’ from next year.
The Resolution Foundation – often described as Chancellor Rachel Reeves’ ‘favourite think tank’ – called for the triple lock to be replaced with ‘a smooth earnings link’ from next year
The think tank said the state pension is already the single biggest driver of higher welfare spending in this Parliament and is set to cost £13.8billion more by 2029-30 in real terms
The Resolution Foundation estimated replacing the triple lock with ‘a smooth earnings link’ from next year would save £650million a year by the end of the Parliament
The think tank estimated such a move would save £650million a year by the end of the Parliament.
It suggested these savings would be enough to double the funding of Labour’s ‘youth guarantee’ programme, which aims to reduce the number of young people not in employment, education or training.
The Resolution Foundation said the state pension is already the single biggest driver of higher welfare spending in this Parliament and is set to cost £13.8billion more by 2029-30 in real terms.
There are close links between the Labour Government and the Resolution Foundation, with former senior figures at the think tank now serving as senior members of Ms Reeves’ Treasury team.
Torsten Bell, who is Ms Reeves’ pensions minister, is a former chief executive of the Resolution Foundation; while Dan Tomlinson, the Exchequer Secretary to the Treasury, is a former senior economist at the think tank.
In its new analysis, the Resolution Foundation described the triple lock as ‘remarkably ineffective at reducing poverty’.
‘In the 15 years running up to its introduction (1997/98 to 2011/12), pensioner poverty rates fell by 15.8 percentage points,’ the analysis said.
‘In the 12 years following the introduction of the triple lock pensioner poverty has risen by 2.3 percentage points.’
The think tank added the ‘unpredictable ratchet effect’ of the triple lock was adding ‘huge uncertainty to the public finances’.
Ruth Curtice, chief executive of the Resolution Foundation, said: ‘The pensions triple lock is a terribly designed policy that has proven to be far more expensive than originally planned, far less effective at reducing poverty than many hoped, and risks causing further economic harm if it continues for much longer.
‘The most sensible way to keep the state pension rising in line with the living standards of the rest of society is through a smoothed earnings link, rather than a random ratchet.
‘Doing this next year would save £650million a year by the end of the Parliament – enough to double the current support to help the one million young people not in employment, education or training back into work.
‘We cannot afford to keep this policy for another Parliament. The Government should call time on the triple lock as soon as possible, and put the savings from doing so to far better use.’
Senior Tory MP Mel Stride, the shadow chancellor, said: ‘Under the last Labour government, the UK had the fourth-highest level of pensioner poverty in Europe. The triple lock played a crucial role in changing that.
‘Pensioners have far less ability to improve their financial circumstances. They can’t simply take on another job, work additional hours, or increase their income in the same way.
‘That’s why we believe it’s important to stand by pensioners, and why we remain committed to the triple lock.’
