The triple lock causes an increase in state pension spending of £11bn a year compared to what spending would have been if growth had been in accordance with either prices or earnings, according to the Institute for Fiscal Studies (IFS).
The new IFS report, part of the Pensions Review in partnership with abrdn Financial Fairness Trust, also finds that by 2050, the triple lock may potentially lead to an increase in spending of between an additional £5b to £45bn annually.
The new state pension is currently worth 25 per cent more than the basic state pension did in 1980 when price indexation was implemented and the connection between the basic state pension and average earnings was severed.
According to the report, a full new state pension would now be worth about £180 per week, 11 per cent less than its current value of £204 per week, if the triple lock had not been in place since 2011 and the state pension had instead increased in line with inflation.
The triple lock system creates uncertainty about future state pensions. The report suggests that it might represent between 26 per cent and 32 per cent of typical earnings in 2050, or between £10,900 and £13,400 yearly, a difference of £2,500.
IFS report author and research economist Heidi Karjalainen says: “The triple lock makes it especially hard to know how much you might receive from a state pension and how much the state pension will cost the state in the future.
“An additional real risk is that retaining the triple lock for too long increases state pension spending so significantly that it leads to insurmountable pressure for a much higher state pension age. This would particularly affect people with poorer health who struggle to remain in employment until they reach state pension age.”
PensionBee director of public affairs Becky O’Connor says: “The state pension forms a large proportion of most people’s retirement income – some people have nothing else at all in old age. It’s vital that older people are kept out of poverty and that their incomes rise by enough to continue to meet basic living costs.
“While there is a case to review the triple lock and make sure it is working as it should, its purpose – to ensure older people are at least able to eat and heat their homes, must be honoured.”
