Labour Party set to maintain state pension triple lock if elected

The Labour Party is set to include a commitment to the state pension triple lock in its upcoming manifesto, according to reports from The i.

Under the state pension triple lock, the basic state pension received in retirement rises each year in line with whichever is the highest out of three factors: wage growth, inflation or 2.5 per cent.

The Liberal Democrats became the first UK party to commit to protecting the state pension triple lock in the next parliament last year, with speculation over the Conservative and Labour Party manifestos having persisted in the meantime.

However, according to The i, multiple sources from the party have confirmed that Sir Keir Starmer and shadow Chancellor Rachel Reeves would back the triple lock policy in their election manifesto, which is currently being drafted by officials.

A senior Labour insider told The i that the state pension would have to grow in real terms as Britain’s housing crisis means more people are reaching pension age without the security of owning their own home or having a council tenancy, warning that “there is a tsunami of pensioner poverty heading our way over the next few decades.”

Indeed, recent research showed that pensioner poverty rates have "almost completely reversed" in recent years, with around 2.1 million pensioners in poverty.

And the state pension has been hitting Brits' retirement confidence, as research from PensionBee found that distrust in the government was one of the top three reasons for negative pension sentiment among over 55s.

However, AJ Bell director of public policy, Tom Selby, said that while it is “no surprise” Labour has decided to commit to the state pension triple-lock, “that does not mean the decision represents good policy”.

“Any politician that advocates maintaining the triple-lock is effectively admitting the state pension is too low,” he said, continuing: “But rather than putting in place a plan to increase the value of the state pension to a level deemed ‘fair’, the triple-lock randomly ratchets up the state pension in real terms depending on earnings growth and inflation at a specific point in time each year.

“This approach has proven extremely volatile in recent years as inflation and earnings have spiked, meaning the cost to taxpayers each year has been both significant and unpredictable.

“The triple-lock has become a totem for ‘doing right by older people’, but as it increases the cost of the state pension, there is a risk planned rises in the state pension age will need to be accelerated to balance the books, embedding intergenerational unfairness into the system.”

Indeed, concerns over the impact of the rising cost of the state pension have been growing, with research from the Institute for Fiscal Studies (IFS) revealing that the triple lock has already raised state pension spending by around £11bn a year since 2010.

Furthermore, it found that maintaining the triple lock could increase spending by anywhere between a further £5bn and £45bn per year by 2050.

However, Selby argued that there are sensible alternatives to the triple-lock which the government should be “seriously” considering.

For example, Selby said that the IFS’ recent suggestion that government sets out what the state pension should be worth in relation to median earnings is a sensible one.

"It would certainly be a much more coherent way forward than the current approach, which is entirely aimless," he added.

"Once you have set a clear goal for the value of the state pension, you can plot steady increases to reach that value. Similarly, building greater certainty into future state pension age increases would help give savers confidence that the goalposts won’t be moved."

A broader review is also needed though, as Selby argued that "at some point soon, the government will need to come clean with voters about the state pension, rather than blindly committing to the triple-lock forever more".

He stated: "Failure to do this will mean the state pension remains mired in uncertainty. An independent review with cross-party support feels like the only way to break the hold the triple-lock has on discussion about the future of the state pension.

"Politicians need to be brave enough to kick-off an honest debate about what the state pension is aiming to deliver in retirement, how it should look over the long term and the associated costs.

"Without that, we risk remaining in a triple-lock-induced Groundhog Day where the only real question is whether or not that policy will be retained.”

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