Pension triple lock warning as Andy Burnham hints at plans if he becomes PM | UK | News
Officials have issued a warning about the future of the retirement triple lock after Andy Burnham hinted at plans for the measure.
The Office for Budget Responsibility (OBR) has warned that the pension triple lock will add billions of pounds to public spending over the coming decades and cause debt levels to soar. The OBR said the debt could be three times the size of the economy if it is not addressed by governments.
Andy Burnham, who is set to become Britain’s next Prime Minister as he is likely to run unopposed in the Labor Party leadership election, recently hinted at plans for a triple lock.
Mr Burnham said last Friday (July 3) ‘it is important that the commitment to the manifesto remains’. Labour’s 2024 general election manifesto pledges to retain the triple lock and suggests Keir Starmer’s expected successor will keep the mechanism in place.
Under the triple lock, the UK state pension is increased every year by inflation, wage growth or 2.5 per cent, whichever is highest. Currently, men and women over the age of 66 are eligible for a state pension.
But the OBR says Britain’s aging population will create a major public finance headache in the coming years.
Under the baseline scenario, government pension spending is projected to rise from 5 percent to nearly 9 percent of gross domestic product (GDP) by 2075-2076, and is therefore a major driver of increased pressure on overall public spending.
The OBR explained that this was partly due to more older people in the population, with the triple lockdown estimated to account for around a third of this increase.
Volatile inflation and earnings growth mean the triple lock is more costly than initially expected when the measure was introduced in 2012.
The OBR estimates the triple lock will add around £15.5 billion to state pension spending each year by 2029-2030; This is up from the initial £5.2 billion per year.
“This certainly puts significant pressure on public spending over the long term and is a very significant contributor to the upward pressure on spending,” the OBR’s Tom Josephs said.
In its modeling of alternative options, the OBR estimated that pressure on spending would ease by around 2% of GDP if state pensions rose with earnings rather than through a triple lock.
The OBR used its report to urge the UK to take early action to prevent debt from heading down an “unsustainable and ever-increasing path”.
