"A wide range of politicians and economists now argue that the triple lock is redundant, with the 2.5% element in particular being called into question."
The Triple Lock guarantees that the increase will be the highest of inflation, earnings growth and 2.5%, however the guarantee is only a government promise - legislation requires only that the Basic State Pension increase in line with earnings.
The 2.5% rise means that from April 2017 the full new state pension will rise to £159.55 a week and the basic state pension to £122.30.
The DWP committee enquiry recently called for the scrapping of the state pension triple lock and proposed replacing it in 2020 with an earnings link combined with an inflation-proofing underpin.
In its report on intergenerational fairness, the Committee admitted that it had "made a valuable contribution in increasing the relative value of the state pension" but that its retention would lead to "state pension expenditure accounting for an ever greater share of national income".
The report argued that the triple lock will have fulfilled its purpose of securing a decent minimum income for people in retirement to underpin private saving by 2020.
It continued: "We recommend the Government benchmark the new state pension and basic state pension at the levels relative to average full-time earnings they reach in 2020. The triple lock should then be replaced by a smoothed earnings link. In periods when earnings lag behind price inflation, an above-earnings increase should be applied to protect pensioners against a reduction in the purchasing power of their state pension.
"Price indexation should continue when real earnings growth resumes until the state pension reverts to its benchmark proportion of average earnings. Such a mechanism would enable pensioners to continue to share in the proceeds of economic growth, protect the state pension against inflation and ensure a firm foundation for private retirement saving. The new state pension and basic state pension it replaced would track average earnings growth in the long term. That is more fiscally sustainable and more intergenerationally fair."
Tom McPhail, Head of Retirement Policy at Hargreaves Lansdown, commented: "A wide range of politicians and economists now argue that the triple lock is redundant, with the 2.5% element in particular being called into question. It is ironic therefore that earnings growth happens to have landed bang on 2.5%, thereby making the third element of the triple lock redundant this year. There is a fair bet that this time next year, it'll be inflation hitting the highest number.
"Pensioners can't continue to enjoy indefinitely a 'heads I win, tails you lose' guarantee at the expense of taxpayers. A review now looking beyond 2020 makes sense. The point of caution in favour of those approaching retirement is that final salary pay outs are about to start diminishing and some are arguing that existing private pension inflation proofing should be cut. Politicians have to strike a delicate balance but if they take too much away from pensioners they could end up sowing the seeds of the next pensioner income crisis."
