When Sir Steve Webb introduced the triple lock as Lib Dem pensions minister in the coalition government, the aim was to close the gap between the state pension and average earnings and reverse years of real-terms decline during which the state pension had not kept up with living costs.
In 2010, the basic state pension was just £97.65 per week, or just over £5,000 per year, for a single person – a truly pitiful amount for someone who had worked for at least 39 or 44 years (depending if you were a man or a woman), even when you consider the greater prevalence of employer defined benefit pension schemes at the time.
Meanwhile, the median gross annual salary for full-time employees at the same point was around £26,000, meaning the state pension represented less than 20% of average earnings.
The triple lock uprates the state pension in line with the consumer price index (inflation), average wage growth, or by 2.5% – whichever is highest – meaning the gap between the state pension and average earnings has slowly closed.
The basic state pension is now £184.90 per week or £9,614.90 a year, while the new state pension (introduced in April 2016 for men born on or after 6 April 1951 and women born on or after 6 April 1953) is £241.30 a week, or £12,547.60 a year.
This compares with a median gross annual salary of £39,039, meaning the basic state pension represents 25% of average earnings, while the new state pension is 32%.
This increase, and the associated drop in pensioner poverty, is welcome. However, the triple lock, and the ratchet effect it creates of the state pension rising faster than both average salaries and the tax revenue required to fund it, is unsustainable over the long term. The parlous state of the public finances and an ageing population mean it cannot be allowed to go on in perpetuity.
The questions we need to ask are: at what point has the triple lock fulfilled its purpose and, once it has, how do we ensure that the state pension keeps up in a fair and equitable way?
I don’t have an immediate answer to either of those questions. I do know we need to start having the conversation, though. It’s vital to build some level of cross-party consensus ahead of the 2029 general election. Otherwise, the risk is that political inertia and a fear of alienating pensioners sees the triple lock recommitted to for a further five years, further exacerbating the fiscal situation and adding to intergenerational inequity.
Theresa May’s decision to launch plans for reform of social care – dubbed the “dementia tax” by opponents – in the heat of an election was the beginning of her downfall and arguably cost her party a majority in 2017.
Similarly, Sir Keir Starmer’s government failed to roll the pitch for the proposal to cut winter fuel payments and hasn’t recovered from it, despite – in my humble opinion – that policy having significant merit.
Setting the scene for ending the triple lock won’t be popular. However, with Labour in disarray, Reform pushing a populist agenda, and the Conservatives constantly looking further right, there is an opportunity for the Lib Dems to show they are the grown ups with a long-term, economically sensible, and fair outlook.
* Adam Shaw is a Liberal Democrat member residing in West Lothian.
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17 Comments
Here we go, swinging to the right again, though no doubt there’ll be a clamour to extend taxation for defence.
According to the joseph Rowntree Trust, relative pensioner poverty rate (after housing costs) hit a record low of 13% in 2011/12 but has since climbed to 16%, meaning nearly 2 million older people are currently living in poverty, Mr Shaw.
Thank you Adam for raising the issue of the Triple Lock; we do need to discuss this across the party. There must be a better way of protecting the income of those pensioners who really need the state pension and those who do not. It is surely one example of many policies that are made in silos rather than doing the task of considering all the income that people receive including any unearned income from large private savings or investments etc..
The backlash over the winter fuel payment axe wasn’t that it was ‘pitched poorly. It was that the cut-off point was too harsh and it impacted a lot of pensioners in the ‘just about managing, but not entitled to benefits’ group.
Any change to the triple lock likewise needs to reflect that there is a big swathe of older folk who aren’t wealthy, and don’t have generous defined benefits pensions. A swathe that is going to get a LOT bigger once Generation X start to reach retirement age in just a few years.
Care costs are a nettle someone needs to grasp. The number of older folk owning their own homes (equity to cover care costs) is already declining and set to do so further.
‘Around 750,000 54-64-year-olds are job hunting/willing to work but economically inactive, and; 2m over-50s are claiming benefits. (Guardian Nov. 2025).
They won’t have ‘large private savings’ (if any) when they reach state pension age. Probably not much of a personal pension, either.
“at what point has the triple lock fulfilled its purpose and, once it has, how do we ensure that the state pension keeps up in a fair and equitable way?”
Excellent article, excellent question.
It was introduced for good reason, but that doesn’t mean it needs to exist forever.
I am against ending the triple lock and believe it’s non negotiable. Many pensioners struggle with the cost of living and rising energy costs despite the recent government cap as they use more heating. Income from savings over the personal allowance is taxed in any case. The tax threshold has been frozen by this government and the previous one. Raising it proportionately should be lib Dem policy. I am surprised the Lib Dem candidate for Makerfield did not make more of this when the issue came up at a recent hustings.
Jason Connor is absolutely correct. Adam Shaw says that the gap has closed, but if you have only the state pension, even at the highest rate you have to live on £241 a week, less if you are older. I challenge Mr Shaw to live on that and pay all his housing costs, heating/energy bills, buy food and clothing. take a holiday – even in the UK – pay the ludicrous costs of public transport (except buses) let alone have any sort of private transport.
The UK state pension is one of the worst in Europe. (Only Greece to my knowledge has a worse one). If you abolish the triple lock UK pensions will get even worse.
It is nonsense that we can’t afford it. The UK is still lightly taxed compared to many other EU countries and taxing a little more will easily fill any percieved gap. Charging people a little more NI when they are working is also necessary.
I suspect Mr Shaw is young and it will be many years till he draws his pension. With his policy, his retirement will be a miserable one if he relies on the state pension.
What part of the “triple lock” would you end, though? Allowing pensions to reduce below either CPI or average wage increases inevitably leads to pensioners steadily getting poorer relative to everyone else.
On the other hand, CPI hasn’t been below 2.5% since 2021 except for a few months in 2024, and average earnings hasn’t been increasing below 2.5% since 2018 except for the obvious and brief dip as Covid first hit, so it’s not as if the “triple” part of the lock has done anything for most of the last decade. You could scrap that bit but that seems to be “all of the political downside and none of the economic upside”.
“even when you consider the greater prevalence of employer defined benefit pension schemes at the time.”
Yes… A party wanting to ensure that no-one was enslaved by poverty might want to look into where they went and whether there was any way to get them back for future generations.
I would favour ending the triple lock when our state pension reaches a level similar to other European countries. We currently have one of the lowest state pensions of any civilised country.
https://www.lovemoney.com/news/530757/how-our-state-pension-compares-to-other-major-countries
A civilised society should try to improve the lot of its poorer pensioners so on balance I believe the triple lock should be kept. However, the reference to an NI increase would be totally unfair. Pensions are effectively paid out of current HMG revenues, there is no Insurance Fund as in a few other countries. NI is a con by successive Chancellors in disguising increases in income tax. Far better to move to reducing NI through to elimination and increasing Income Tax accordingly. That way young working people struggling with families and mortgages won’t be subsidising comparatively well-off pensioners like me!
@KeithCresswell. You could argue that NI is just income tax by another name, except that your NI contributions determine the level of pension you can get. If we do want better basic pensions we have to pay for them through increased taxation of some sort. Until we have a better pension scheme NI is relevant and so higher NI contributions could be used to raise the state pension so that even those who have no other pension can live on it. I would suggest it should be rather nearer £20,000 that the £11,000-£12500 it is now. Even then it would be at the low end of pension provision in Europe.
@ Mick,
Are you proposing that NI contributions be increased now to increase the level of the State pension currently?
One objection will be that this increases the pensions of those who previously only paid NI at a lower rate without doing anything to ensure that those who have to pay at a higher rate will benefit from a higher pension themselves in the future.
National Insurance contributions don’t actually determine the level of pension we all can get. Government doesn’t set them aside for future use. In fact it can’t do that. Pensions are always a transfer of real resources from the younger generation to an older generation. We can’t easily send resources forward to supply a future generation and it’s impossible to send resouces back from a future generation to repay the debts incurred by a previous one.
The ability of a future government to be able to support a higher level of pensions for the current workforce will depend on what a future generation will be able to produce.
Good article – about an important question. We (preferably as a country) need to decide the appropriate % of average earnings pensioners need for a decent life – and which is similar to the average pension enjoyed by others in Europe. We should then continue with the triple lock until it reaches that level then start removing the extra bits all pensioners get, possibly starting with the £10 Christmas bonus, which must take more in admin that pensioners actually get. Then reduce the winter fuel payment, then remove it altogether but always pausing this process if the agreed % is not reached. After that we can look at dropping the triple bit. But the important part is to agree that % so it doesn’t come as a big surprise. But thanks for the article – the matter needs discussing in a factual way rather that with a lot of heat which always stocks up fear. By-the-way, I am speaking as pensioner.
Those arguing our state pension ‘is the lowest in Europe’ completely misunderstand the nature of these pension systems. Those state pensions are designed to be the main or only income for pensioners, and taxes are higher to cater for this. Whereas the UK state pension is supposed to be supplementary to private provision, therefore instead of higher taxes, workers are meant to divert this untaxed surplus into their own pension schemes. That’s why we now have auto-enrolment.
There are two difficult but necessary pension reforms needed. 1. Tie state pension to earnings or inflation now that the triple lock has done it’s job. 2. Increase auto-enrolment contribution rates to a combined 12-15%. The current rate is far too low.
@ Paul,
Your comment is valid.
According to the “Mercer CFA Institute Global Pension Index”, the UK pension system has a slightly higher rating than either Germany or France. See page 16 of the link below. At least anecdotally, the elderly look to be the ones with the spending power right now. Mortgages are usually paid off. Private pensions are being paid out. Children are off the books.
I feel guilty about getting 30% of rail fares and free bus passes etc. It’s the young who need help more than us pensioners. It’s not the right time to impose higher taxes on them.
This is not to suggest there is no aged poverty in the UK and that there isn’t a high level of inequality. To solve it, though, probably needs a more targeted approach.
https://researchbriefings.files.parliament.uk/documents/SN00290/SN00290.pdf
Balancing the needs of our old and young people is a dilemma especially when our economy remains week through poor growth. Our young people are getting a raw deal at present as shown by the number of NEETs and the other disadvantages they face at an uncertain time. If pensioner support was more targetted it might allow funds be diverted to help young people and their families.