Pensioners may be set to get up to £13,000 per year in state pension by the end of the decade under the triple lock policy, sparking fears the qualifying age for the payment could be hiked.
The full new state pension could reach £13,236.10 by 2029/30, according to analysis by AJ Bell.
It follows reports that both Labour and the Conservatives will recommit to the triple lock – a commitment to uprate the state pension by the highest out of average earnings growth, inflation or 2.5 per cent each year – in their election manifestos this year.
While pensioners and those nearing retirement would likely welcome the move, there's ongoing concern about the affordability of the triple lock.
The UK state pension age is set to rise to 67 then 68 in the future
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Tom Selby, director of public policy at AJ Bell, said: “Retirees will no doubt be rejoicing that both major parties appear set to recommit to the state pension ‘triple lock’ for the next Parliament, with the gold-plated pledge potentially pushing the value of the state pension past £13,000 a year by the end of this decade.
“Given how critical the votes of older people are to winning a general election, it is no surprise both the Conservatives and Labour appear to be taking a safety-first approach to the triple lock.
“The policy has become a totem for ‘doing right by pensioners’, with debate over the state pension often restricted solely to politicians’ commitment to increasing the benefit by the highest of average earnings growth, inflation or 2.5 per cent.”
Mr Selby said despite the policy being “popular”, he thinks it’s “entirely aimless” as neither major party has clearly stated how much they think the state pension should be worth.
Furthermore, he warned that significant hikes to the state pension could add pressure to the need to increase the state pension age, to pay for it.
Mr Selby said: “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 next government needs to set a clear plan for the state pension, both in terms of what a ‘fair’ value is, perhaps as a proportion of average earnings, and the length of time retirees should be in receipt of it on average.”
Mr Selby called for a review of exactly how the state pension increases are applied following the dramatic fluctuations in inflation and earnings, seen following the coronavirus pandemic.
“Smoothed” inflation and earnings figures could make future rises “much more predictable”, he suggested.
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Mr Selby added: “For this necessary reform to happen, politicians will need to show bravery and step beyond the current ‘Will they? Won’t they?’ debate over the triple lock.
“The state pension remains the bedrock upon which people’s retirement plans are built, so embedding at least some certainty into the system is crucial to help Brits plan with confidence.
“Given how politically charged debates over the state pension can be, an independent commission will likely be necessary to build cross-party support and deliver reforms that stand the test of time.”
How much is the UK state pension?
The full new state pension is currently £203.85 per week, working out at £10,600.20 per year.
The full basic state pension is £156.20 per week, or £8,122.40 per year.
The UK state pension will increase by 8.5 per cent from April 2024, taking the full new state pension to £221.20 a week, or £11,502 a year.
The full basic state pension will increase to £169.50 a week, or £8,814 a year.
