The triple lock could soon become unaffordable with a new plan for keeping the state pension increase needed, an expert has warned.
Mark Pemberthy, benefits consulting leader at insurance group Gallagher, said: “Whilst the triple lock may be affordable over the next five years, it looks unsustainable in the longer term.
”The future cost of the state pension as a percentage of GDP is projected to increase by more than 50 percent over the next 50 years and this looks unaffordable.
“It is important that we look beyond the short term political cycle and establish a stable long-term plan for a sustainable state pension, if we are all going to be able to plan for our futures with confidence whilst ensuring fairness for future generations.”
State pension payments are increasing 8.5 percent this month, following a 101. Percent increase last year.
Prime Minister Rishi Sunak recently pledge the policy would remain in place for the entirety of the next Parliament if his is party is elected again.
He said he believes the triple lock is affordable, saying: “The track record of the Government is that we make priorities, and making sure that if you have worked hard all your life you have the dignity that you deserve in retirement is important to me, it’s important to the Government, and the triple lock is an expression of that.”
Wealth firm AJ Bell calculated that if the triple lock stays in place, by the 2029/2030 tax year, payments could rise to £254.54 a week, or £13,236.10 a year.
This would mean the full new state pension would cross the current threshold for paying income tax, at £12,570 a year, by 2028/2029.
Tom Selby, director of public policy at AJ Bell, said: “While the policy is understandably popular, it remains entirely aimless, with neither major party clearly stating how much they believe the state pension should be worth.
“As the real value of the state pension rises as a result of the triple-lock, it also increases the likelihood of planned state pension age hikes being accelerated to balance the books, creating both uncertainty and the potential for intergenerational unfairness.”
The group calculated how much the full new state pension could increase based on Bank of England predictions for inflation and earnings growth, if the triple lock is retained:
2024/2025 – £11,502
2025/2026 – £11,962.08 – four percent (based on earnings)
2026/2027 – £12,291.04 – 2.75 percent (based on earnings)
2028/2029 – £12,913.27 – 2.5 percent (based on lowest limit)
2029/2030 – £13,236.10 – 2.5 percent (based on lowest limit).
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