Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

What is the state pension triple-lock – and how could it change in the future?

Changes to the pension guarantee in the Isle of Man have left many wondering if the UK could follow suit

Albert Toth
Friday 31 January 2025 08:16 GMT
Comments
Tory leader Kemi Badenoch says she is looking at means testing triple lock

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

The Isle of Man is set to scrap its version of the triple lock on pensions as its government says the measure is becoming unaffordable. The change will affect all residents who reached state pension age after 5 April 2019, introducing a watered down version of the UK’s state pension triple lock.

Laying out the changes, Isle of Man treasury minister Dr Alex Allinson MHK said the government was in agreement that “workers and businesses should not be forced to bear the burden of paying increased contributions” to the pension fund.

It’s very unlikely that a similar move could be made in the UK. However, earlier this year Conservative leader Kemi Badenoch said that the UK’s triple lock should be ‘means tested’ to make sure the country is “growing”, sparking criticism from Labour opponents.

Appearing on LBC, the leader of the opposition said the Conservatives are “going to look at means testing” the measure used to increase the state pension year on year. It is currently in place for all pensioners, regardless of income or savings.

Speaking to host Iain Dale, Ms Badenoch said: “Means-testing is something which we don’t do properly here.”

“Starting with the triple-lock is not how to solve the problem. We need to start with: why are we not making the same kind of money we used to make?

Conservative Party leader Kemi Badenoch has sparked debate about pensions
Conservative Party leader Kemi Badenoch has sparked debate about pensions (PA Wire)

The Conservative leader has been asked by MPs to clarify what her comments would entail, but has so far not responded. They are a far cry from her predecessor Rishi Sunak’s pre-election promise to introduce the ‘triple lock plus,’ which would have also seen the tax-free pension allowance increased every year.

What is means testing?

Means testing is when a person’s finances are assessed to determine if they are eligible for a certain payment, or eligible for it at a different scale. It is based on the principle that those with less personal wealth should be more eligible to receive financial assistance than those with higher wealth.

Labour recently drew criticism for its mean testing of the winter fuel payment, which meant that only pensioners on the lowest incomes were eligible for the cold weather benefit.

Means testing the state pension triple-lock would likely mean reducing the annual rise for certain pensioners based on factors like their income, savings, and assets. This could either be done with a sharp cut-off, as with the changes to the winter fuel payment, or on a sliding scale.

What is the state pension triple lock?

The triple-lock guarantee, first implemented in 2011, means the state pension increases year-on-year by the highest of three measures. These are:

  • Inflation, taken from the previous September’s Consumer Price Index (CPI) figure
  • The average wage increase in the UK
  • Or 2.5 per cent, if both inflation and earnings are lower than this percentage

In 2024, the state pension increased by 8.5 per cent, in line with the previous September’s inflation figure.

This April, it will go up by 4.1 per cent, matching wage growth in 2024.

The triple lock was introduced to ensure that the state pension would not be outstripped by rising prices, nor by the average spending power of those in work.

The measure has been criticised for potentially lacking long-term sustainability, costing the government more each year. In 2023/24, pension payments cost the government an estimated £124.3 billion.

What is the state pension age in the UK?

The current state pension age in the UK is 66. This is the age at which you can retire and start receiving your state pension. Before this, you can only withdraw from a personal pension, depending on your provider, and usually not before you reach 55.

The state pension age is set to rise from May 6, 2026, to 67. This transition will be gradual, with the state pension age being 66 and 1 month for someone born on April 6, 1960, 66 and 2 months for someone born on May 6, 1960, and so on.

It will then hit 67 for anyone born on or after March 6, 1961.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in