A major political row surrounding the state pension looms as future Prime Ministers and Governments are being told to “confront” the financial sustainability of triple lock payment hikes.
Former Greater Manchester Mayor Andy Burnham is widely expected to replace Prime Minister Keir Starmer as Labour leader and get the keys to Number 10 Downing Street.
Analysts are predicting what fiscal reforms a Burnham administration would enact in office, with pension industry figures calling on state pension reform.
Under the triple lock, state pension payments are guaranteed to increase every year in line with either inflation, average wage growth, or 2.5 per cent; whichever is highest.
Based on data from the Office for Budget Responsibility (OBR) found that the payment uprate mechanism will cost the Treasury £10billion more than initially projected.
As such, retirement industry specialists are calling politicians from all parties to review their current pledges to maintain the triple lock in its current form.
Steven Cameron, the pensions director at Aegon, urged the next Prime Minister to tackle the issue of the triple lock when attempting to balance the books.
He shared: “While avoided by successive Governments, politicians across the spectrum as well as think tanks are now increasingly questioning its long-term future and today’s political change creates the opportunity for an open and honest debate.
“Importantly, it’s not a simple case of keep it or scrap it – there are other options worthy of proper consideration.
“Recent comments from Mr Burnham, reaffirming he, if Prime Minister, would retain support for the triple lock, may provide short-term reassurance to today’s pensioners.
“But what’s needed from all major political party leaders is a longer-term vision for how the state pension can remain fair, affordable, and sustainable not for the next three years but for the next 30 years and beyond.
“With an ageing population and fewer workers supporting more pensioners, the current system is already creaking at the seams and without reform, the triple lock will place an unprecedented burden on working-age taxpayers, raising serious questions around intergenerational fairness.”
He added: “Aegon has long supported an amended form of the triple lock which would retain the principle of pensioners sharing in rises in the nation’s prosperity while introducing greater stability.
“Recently, year-on-year inflation and earnings growth have been unpredictable and volatile. A fairer approach might be to provide inflation increases as a minimum, with a further uplift if earnings growth has exceeded inflation over, say, three years.
“This would smooth out volatility, provide greater predictability for public finances, and preserve fairness for pensioners. Done properly, reform could be the saviour of the triple lock’s aims rather than an end.
“The debate now needs leadership, honesty and a genuine commitment to finding common ground across both political parties and generations.”
