Scrapping triple lock could save £19 billion a year – Daily Business

State pensioners received an above inflation rise this year

Raising the state pension by inflation could save £19 billion a year by 2035, according to research by a think tank which is calling for the triple lock to be scrapped.

Since 2011 the state pension has risen by the highest of three measures – inflation, wage growth, or 2.5%.

This year the full rate of the new state pension will increase by 4.8% in line with the increase in average earnings.

Pensioners are £1,300 a year better off than they would have been if the state pension had risen only in line with inflation over the past decade.

Critics say that it has become unaffordable and is forecast to be £10bn more expensive a year than forecast, based on Institute of Fiscal Studies (IFS) figures. There are concerns it could force ministers to raise the state pension age further and faster.

There is also concern that it exposes the Treasury to random fluctuations in any of the factors used to fix the annual increase.

The Intergenerational Foundation, which promotes economic fairness, is calling for the state pension to increase with inflation until 2030-31 then by the average of inflation and wage growth.

It calculates that this would save £19bn a year by 2035, £28.5bn a year by 2040 and £38bn a year by 2045. These avings should be directed to poorer pensioners through a new low-income pension supplement worth £30 a week (£1,560 a year), says the foundation.

Conor Nakkan from the foundation said: “The triple lock may have been introduced with good intentions but it has become an expensive and poorly targeted policy.

“It now delivers large increases to all pensioners, including millions who are already well-off, while younger generations face stagnant living standards, high housing costs and a growing tax burden.”

The state pension is expected to cost £146 billion (about 5 per cent of GDP) this year, sharply up on the £86bn cost in 2005 when it represented 4.14% of GDP).

The Tony Blair Institute, another think tank, has estimated that it could rise as high as 7.8 per cent of GDP by 2070 if the triple lock remains.

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