Triple lock pension explained: How it works?

The state pension triple lock is a UK government rule that the state pension goes up every year by at least 2.5%. Each year, the government assesses three aspects: inflation, average wages, and 2.5% (a fixed minimum). Whichever is highest is the amount the pension increases by.

For instance, if inflation is 3%, wages grow 4%, and the fixed percentage is 2.5%, the pension goes up by 4%. Similarly, if inflation is 1% and wages grow 1.5%, the pension goes up by 2.5% as the fixed minimum is set at that percentage.

Why it matters

It protects pensioners from rising prices and ensures their incomes don’t fall behind. But it burdens the government (costing £15.5bn a year), which is why some politicians want to change or scrap it to fund other social welfare programs.

Why Burnham may scrap it

Prime Minister Andy Burnham is under pressure to reform or replace the triple lock to fund a proposed national care service which costs around £18bn a year. Former chief secretary Darren Jones suggests reallocating triple lock funds to finance social care for older people. As Lord Blunkett said, the reform could save up to £22bn by 2030.

For now, the policy costs around £15.5bn a year, driven by volatile prices and earnings. The Institute of Fiscal Studies warns it creates long-term fiscal uncertainty.