Jon Greer, head of retirement policy at Quilter: “The news reported today that the triple lock is likely to be uplifted by average earnings next year, with confirmation expected from next week’s average total pay figure, is a significant development for pensioners. According to the BBC, the Treasury anticipates that the new full state pension will be boosted above inflation by over £400 a year in cash terms.
“The triple lock ensures that the state pension increases every April by the highest of inflation, average wage increase, or 2.5%. This mechanism helps to maintain the purchasing power of pensions and provides financial security for retirees.
“However, the sustainability of the triple lock in the long term is questionable. It remains a contentious issue in pension policy, with no government willing to make drastic changes due to the potential backlash from a core voter base. Given recent changes to winter fuel payments which spurred immediate calls for a rethink due to the number of people who will struggle to pay their bills this winter as a result, any alterations to the triple lock by Labour seem entirely remote and more so given Rachel Reeves’ recent confirmation that it would stick by the policy.
“The debate around the triple lock often intersects with discussions on the appropriate level of the state pension relative to mean full-time earnings. There is a need for a consensus on the state pension level and a fair mechanism to ensure its value is maintained over time. Without such an approach, each uprating of the state pension risks creating generational divides. A system more closely aligned with average earnings might be more cost-effective and better reflect the nation’s overall prosperity.
“While the anticipated uplift in the state pension is positive news for pensioners, it is essential to consider the broader implications and sustainability of the triple lock policy. The government’s pension review will latterly look at pensions adequacy which must consider both state and private provision. Perhaps the review will be the mechanism to start the journey for change that removes the politics from the triple lock.”
Helen Morrissey, head of retirement analysis, Hargreaves Lansdown:“Strong wage growth looks set to deliver a boost of over £400 to pensioner’s pockets. It’s a much smaller increase than those we’ve seen in recent years, but remains comfortably above inflation, so will give retirees some much-needed breathing space in budgets. However, there are a few flies in the ointment.
For many pensioners, this increase will need to be offset by the removal of the winter fuel payment. Only those on pension credit will now receive it, and this will amount to a gap of up to £300 this winter. This will be especially keenly felt by older pensioners on the basic state pension. They receive the largest amount in winter fuel payment, but will see a smaller increase in their state pension, as they're not on the new flat rate.
Meanwhile, those on pension credit will be wrestling with the fact they won’t be receiving a cost-of-living payment this November. Last year they had a £300 payment to help take some of the pain out of winter energy bills, so losing this will take a toll.
The timing of the rise is also unhelpful for pensioners struggling to make ends meet over the winter. The promise of a spring boost will bring cold comfort to those who are making difficult decisions about whether they can afford to heat their homes in the colder months.
Even when the state pension rise comes, there’s the issue of frozen tax thresholds bringing the state pension ever closer to tax paying territory. The increase will take the full state pension to around £12,000 next year, perilously close to the limits of the personal allowance. With the freeze expected to remain in place until 2028, there’s every chance we could see the state pension become taxable in the near future.
As we head towards the Autumn Budget, rumours have also surfaced suggesting that the government might look to means-test the state pension in a bid to save money. The situation is certainly challenging, as increasing longevity has contributed to a burgeoning bill. We’ve seen previous governments increase the state pension age in a bid to contain these costs, but there’s only so far these increases can go, given people can only work for so long. The rumours will cause an enormous amount of worry, because the state pension forms a vital part of pensioner incomes. People need certainty as to what they will get, and when, so they can plan for retirement. We need to see the state pension and the triple lock’s role form part of the government’s pension review, whereby pension provision can be assessed in a holistic manner that puts the state pension on a sustainable footing long term.”
Lily Megson, Policy Director at My Pension Expert said: “The government’s renewed commitment to the triple lock coupled with the Treasury’s expectation of an above-inflation increase will provide some relief to pensioners. While debates about its affordability will likely rage on, the triple lock has been essential in protecting retirees’ incomes, ensuring their state pensions keep pace with inflation or earnings – crucial given the soaring cost of living over the last few years.
“But while the increase is welcome, it’s important to remember that many pensioners will still face significant financial challenges. The recent decision to cut the winter fuel payment for most households will be a major concern for many older people at a time when energy prices remain high. Simply put, the triple lock alone won’t address all the UK’s pension challenges.
“Instead, it's crucial that the government takes additional steps to improve financial literacy among savers. By collaborating with the financial services sector, they can ensure accessible financial education and advice, empowering people to take control of their financial futures.”
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