Triple lock warning as policy creates ‘enormous uncertainty’

People trying to plan for their retirement face “a lack of certainty” as the future of the state pension increase is in doubt, an expert has warned.

Many analysts are predicting the average earnings measure due to be released tomorrow will likely be the metric for determining the state pension increase next year, which could be above eight percent.

Tom Selby, head of retirement policy at AJ Bell, warned there is a lack of a clear goal with the triple lock policy and that the financial burden of the policy is becoming unsustainable for the Government.

He said: “A central problem with the triple lock is that it is a policy without a clear goal as things stand, randomly ratcheting up the value of the state pension in real terms whenever inflation and earnings growth are below 2.5 percent.

“It also leaves the Government exposed to spikes in inflation or earnings – a flaw which has been brutally exposed in recent years.”

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High levels of inflation over the past year meant state pensioners had a record 10.1 percent increase this April.

Inflation was at 6.8 percent in the latest figures suggesting the average earnings figure will most likely be the figure used to determine the payment increase next year.

Mr Selby said: “Should wage growth come in at over eight percent again, the full new state pension could surge past £220 a week, or almost £11,500 a year.

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“Increases of this scale will inevitably spark debate about whether the triple-lock should be retained.”

He warned the Government may have to make some tough decisions as the costs of the state pension spiral.

Mr Selby said: “By 2050, the policy could see state pension spending rise by anything between £5billion and £45billion a year in today’s terms.

“For savers, this lack of certainty about future increases makes it difficult to plan their own retirement saving.

“What’s more, as the triple lock increases the value of the state pension, other cost-saving measures – most likely future state pension age increases – will inevitably become more likely.”

The state pension age is currently 66 but is gradually increasing to 67 between 2026 and 2028 and then to 68 between 2044 and 2046.

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