Beginning in next April, the UK state pension will increase by 4.7%. One reason for this increase is the government’s continued fierce dedication to the triple lock system. This increase will be more than £500 a year for all individuals on the new state pension. Combined with the new provision, this policy change prompts significant alarm bells over the forthcoming financial burden of such a policy. The triple lock was former Chancellor George Osborne’s flagship policy introduced in 2010. It makes sure that pensions go up according to the most advantageous figure out of inflation, average earnings growth or 2.5%.
Even though the triple lock has been good news for pensioners, it has attracted much more passionate heavy fire over the years. Critics contend that such a move would create a huge fiscal cost on state coffers, while deepening inequalities across generations. The Labour government has made all sorts of noises about respecting this commitment, including Work and Pensions Secretary Pat McFadden doubling down on that commitment last week.
The new weekly amount for the basic state pension will increase from £176.45 to £184.75. This rise is one third of the total increase driven by the triple lock. According to new inflation figures released last week for September, the rate is at 3.8%. Estimates from the state’s own experts indicate this number is unlikely to increase much, making a 4.7 percent jump in pension payments all but inevitable.
The triple lock hasn’t come without its controversies. All of which has resulted in it becoming far more costly than ever envisioned, leading to a black hole of uncertainty around future federal outlays. Heidi Karjalainen, a leading expert in this field, laid out the financial impact of the policy.
“The triple lock has so far been much costlier than initially expected, and it creates a lot of uncertainty in terms of future spending.” – Heidi Karjalainen
Even as successive governments have pledged to keep the triple lock under persistent, even hostile, questioning, the argument over its sustainability rages on. Critics note that although it is important to protect the incomes of pensioners, it is at an extremely high cost to taxpayers. Daisy Cooper, a member of parliament with the centrist/center Liberal Democrats, blasted the lack of consideration about the downstream effects on other public services.
“[It has put] even more pressure on already stretched public services and leaving businesses scrambling just to keep the lights on.” – Daisy Cooper
The recent jump in state pension payments will inevitably strain state budgets. This punishment comes at a time when crucial sectors, such as social care, are already on their knees. Policymakers have a special social obligation to make sure that pensioners are taken care of. This simple task requires a nuanced balancing act that takes many different considerations into account.
The triple lock ensures that older people never have to live in poverty. Given its financial implications, the question must be asked about the long-term viability of these policies. That is a critical lesson from the continuing debate about how best to assist today’s retirees. Now we need to re-imagine how we help the next generation save for retirement.