The Office for Budget Responsibility (OBR) forecast that the triple lock will cost £15.5bn annually by 2029-30, three times higher than initially expected, has intensified calls for the government to conduct a formal review of state pension uprating and its adequacy.

According to the OBR’s Fiscal risks and sustainability report, the rising cost is largely driven by "significant" inflation volatility and lower earnings growth, with the non-earnings components of the triple lock triggered in eight of the 13 years since its introduction in 2012.

If this volatility continues over the next 50 years, the OBR warned that state pension spending could increase by an additional 1.5 per cent of GDP, equivalent to £43bn in today’s terms, by the early 2070s.

Quilter head of retirement policy, Jon Greer, acknowledged the importance of the state pension in supporting retirees, particularly amid ongoing inflationary pressure, but cautioned that “the long-term fiscal implications of the triple lock cannot be ignored".

“The OBR has now forecast the cost of moving from an earnings-link in 2012 to the triple lock uprating mechanism is set to reach £15.5bn annually by 2030, three times higher than its original estimate, highlighting the strain placed on public finances from fluctuating wages and inflation,” he said.

“Despite its good intentions, the triple lock lacks a defined benchmark for pension levels and risks placing an unsustainable burden on both taxpayers and future generations.”

Greer pointed out that this concern was echoed by the Institute for Fiscal Studies (IFS) in its recent Pensions Review and amplified by the Adam Smith Institute, which warned of fiscal unsustainability as early as 2036.

“The OBR described the UK’s fiscal position as “relatively vulnerable,” citing demographic pressures and policy reversals that amplify spending commitments,” he said.

AJ Bell head of financial analysis, Danni Hewson, noted that London markets have looked “remarkably sanguine” following the latest OBR warning on the state of the UK’s public finances.

However, Hewson said when the government’s forecaster uses “terms like vulnerable, it’s hard not to hear alarm bells ringing”, especially following the series of U-turns from the government on measures that had been intended to save money.

In light of this, Greer encouraged the government to start a formal consultation on pension uprating, coupled with a comprehensive review of the state pension’s adequacy, to determine a “fair and financially viable” future path.

Greer suggested that such a review should also involve a cross-party agreement on what proportion of mean full-time earnings the state pension ought to reflect.

He added that once this standard is set, the uprating mechanism could then be reformed to track average earnings growth, with built-in flexibility to accommodate periods of high inflation.

For instance, he said, that if earnings growth temporarily lags behind price increases, the pension could be linked to inflation until real wages recover, at which point it would revert to its earnings-based benchmark.

“This approach would better reflect the overall health of the economy, protect pensioners’ purchasing power, and embed a principle of intergenerational fairness,” Greer explained.

“A modernised system, aligned with economic conditions and demographic shifts and is imperative for the sustainability of the state pension system.”

Hewson said: “The job of chancellor is looking like a rather thankless one right now, with more public sector strikes over pay, warnings that the cost pencilled in for the state pension triple lock when it was introduced in 2012 needs rubbing out and replacing with a number three times higher, and debt forecast to top 270 per cent of GDP in less than 50 years.

Hewson said that there could now be a temptation to consider further changes to the state pension age “sooner rather than later” with the OBR’s forecast factors in three rises to the state pension age, taking it to 69 between 2072 and 2074.

She said this would be a “deeply unpopular move” but noted that high inflation over the past couple of years has “taken a chunk out of the Treasury’s coffers” and the government may find itself “forced” to fully address questions about the future of the state pension and its sustainability.

My Pension Expert policy director, Lily Megson, added that the expense of the state pension has been the subject of debate for decades, however, the OBR figures underline the “urgent need” for individuals to take greater control of their retirement planning.

"We know that proper financial advice empowers people to make informed decisions that can secure their financial futures and ease pressure on state support systems,” she said.

"We are urging the government to encourage more people to start saving early through an awareness campaign and improve access to independent financial advice.

“By taking proactive steps today, people can build their own financial resilience and help foster greater economic security and growth for the country as a whole."

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