Pension triple lock reform breaks out

The triple lock was introduced by the coalition government in 2010 with the goal of raising the value of the basic state pension as a proportion of average earnings. It currently requires the old and new state pension (but not any other state pension components) to increase each April by the greater of:

• Yearly consumer price index (CPI) inflation to the previous September;
• The annual growth in average earnings (including bonuses) for the previous May to July period; or
• 2.5%.

At the time of writing, it looks almost certain that for April 2027, the triple lock increase will be determined by the earnings growth number, which was 3.9%. August 2026 yearly inflation was 3.1%.

What might change?

In his late September speech to the Labour Party conference, Andy Burnham proposed to “adjust” the triple lock so that from 2030 onwards – after the next election – increases would be the greater of:

• CPI inflation;
• 2.5%; and
• the amount required to ensure the state pension grows in line with average earnings growth from 2030.

The difference from the current version may sound like the proverbial splitting of hairs, but it will have long-term impact. The present best-of-three system has a ratcheting effect, which means that in the long run the state pension rises faster than earnings. This would not be the case for Burnham’s adjusted triple lock.

According to the Resolution Foundation, if the new mechanism had been in place since 2012, it would have meant the State Pension was:

• 4.5% higher than if increases were linked to earnings, but
• 5.9% lower than the existing triple lock.

The impact would then probably come through only slowly. From 2030 there will be no effective change from the current version of the triple lock, while yearly earnings growth outpaces both price inflation and 2.5%. Nevertheless, in the long term, the savings on pension expenditure could be significant. The government estimates that by the end of the 2030s, savings could amount to £15 billion a year, rising to £50 billion a year by 2050.

Those savings are earmarked for funding adult social care, but they also mean a less generous state pension than the current triple lock would provide. A reminder that personal pension planning is a key component of future financial well-being.