State pension policy is back under scrutiny and the future of the triple lock mechanism is looking increasingly uncertain.
Introduced in 2011/12, the triple lock guarantees that annual State pension increases match the highest of:
- CPI inflation (September measure)
- Average earnings growth (including bonuses, to July)
- Or a fixed 2.5%
While it was intended to protect pensioners’ purchasing power, recent analysis reveals that this promise carries steep long-term costs, raising questions about sustainability.
Mounting Fiscal Pressure
The Office for Budget Responsibility (OBR) originally forecast that by 2029/30, triple lock indexation would cost £5.2 billion more per year than an earnings-linked alternative. Its updated projection? £15.5 billion, nearly triple the estimate.
Lower wage growth and volatile inflation since 2011 have inflated pension uprating costs dramatically. The OBR’s modelling for 2073/74 includes three scenarios, with a central estimate reaching £48 billion (in today’s terms).
Similarly, the Institute for Fiscal Studies (IFS) estimates that by 2050, the triple lock could be costing the Exchequer £5–£40 billion annually above earnings-based indexing.
Strategic Implications for Retirement Planning
While the mechanism remains politically sensitive, especially post means-testing controversies, its longevity should not be taken for granted. For individuals with substantial pension assets, this is a timely prompt to review pension income forecasts and private savings models.
19th August 2025
