Yesterday, Prime Minister Andy Burnham announced plans to overhaul the state pension triple lock from 2030, removing the earnings link to help fund a major expansion of social care provision for older people.
Burnham confirmed that the triple lock will be 'adjusted' from 2030 to rise every year "at least by prices or 2.5%", during his first conference speech as Prime Minister.
Under the current rules, the policy, which Labour has pledged to maintain until the end of this Parliament, means that the state pension rises by the highest of inflation, wages or 2.5%.
During his speech, Burnham said: "The state pension will continue to rise every year at least by prices or 2.5%."
"And it will hold its value relative to earnings over time so that pensioners will always share in the rising prosperity of the nation.
"This change will generate significant savings, which we will use to build up our own National Care Service."
Industry reacts
Adam Cole, retirement specialist at Quilter: "Andy Burnham's decision to confront the increasingly difficult question of whether the triple lock is sustainable in its current form marks the beginning of a debate that has been postponed for too long. The triple lock has undoubtedly succeeded in improving pensioner living standards and protecting retirees through periods of high inflation, but growing longevity, demographic pressures and rising State Pension costs mean questions about its long-term affordability and sustainability can no longer be avoided. For too long, reform has been tossed from government to government like a hot potato that no one wants to keep.
"The commitment to ensure the state pension 'holds its value relative to earnings over time' is particularly significant because it suggests earnings may continue to play an important role within the future framework. However, the devil will be in the detail. At this stage it remains unclear whether that means maintaining the state pension at a certain proportion of average or median earnings, smoothing earnings growth over a number of years, or using another mechanism entirely. Equally important is what happens when earnings growth runs ahead of inflation or 2.5% for a sustained period.
"If the state pension is intended to maintain its value relative to earnings over the long term, there will need to be some mechanism that allows it to catch up with wage growth over time. The broad principle may be clear, but the practical design of the system will ultimately determine how well it balances sustainability with pension adequacy.
"Policymakers must balance providing adequate support for pensioners, maintaining fairness between generations and ensuring the system remains affordable for taxpayers over the long term. While concern about the future cost of the triple lock is understandable, the answer cannot simply be to focus on reducing expenditure without first deciding what level of support society expects the State Pension to provide.
"Future retirees may also be more reliant on the state pension than many pensioners are today. Our research shows defined benefit pensions account for 33% of income among over-80s with above-average retirement incomes, compared with just 14% among younger retirees. As these schemes become increasingly rare, future generations are likely to rely more heavily on the state pension and defined contribution pensions to fund retirement.
"More detailed proposals will emerge alongside, or following, the Pensions Commission's final recommendations in spring 2027. Given the Commission has been tasked with examining the sustainability, adequacy and fairness of the UK's pension system, its findings should provide an important evidence base for Labour's longer-term pensions strategy."
Tomm Adams, partner at Blick Rothenberg: “In his Labour conference speech, Andy Burnham introduced the concept of a National Care Service (NCS) from 2030 and the intention to demote the triple lock to a double lock from the same point.
“His comment that it will still maintain its worth “relative to earnings growth over time” seems to leave a fair amount of detail unspoken, and perhaps that lack of clarity is intentional whilst Treasury and the OBR take time to do the full costing. Possibly, he is referring indirectly to the commitment to effectively means test pensioners for access to the system, such that those with only state pensions will not need to pay for care under the NCS.
“Although the current marginal cost of the state pension under triple lock is widely reported at £16bn per annum (roughly 10% 'overspend', in this sense, against £154bn spend annually), it’s unclear in today’s volatility and cost-of-living increases whether this will be sufficient to fund the NCS, and we have to imagine that there may be nasty tax surprises on occupational and personal pensions to close the gap in the shorter term. I strongly discourage tinkering with tax on pensions already accrued, given the wider population’s reliance on these sources of retirement income by comparison to other European countries like France or Italy, for example. I would have liked to have seen a commitment to protect occupational/personal pension rights already accrued, rather than leave the pre-Budget rumour mill turning.”
David Brooks, head of policy at Broadstone: “The Prime Minister has today announced changes to the current triple lock system, grasping a nettle that has appeared increasingly likely to need grasping amid pressure on the public finances and long-term impact of demographic changes.
“It is important to note that this will not challenge the principle of a rising state pension which will continue to increase every year. The Prime Minister has committed to raise the state pension by a minimum of 2.5% or the rate of inflation, annually, while also retaining a mechanism that would mean it also keeps pace with earnings.
“Significantly, this looks like a move towards a smoothed earnings link, rather than an annual ratchet, meaning that the state pension would remain anchored to its value relative to average earnings, helping to prevent one-off spikes from permanently compounding outsized hikes.
“It's worth remembering what the state pension was designed to achieve – a foundation of retirement income and protection against poverty in later life. It was never intended to be the sole answer to retirement provision with the UK system built on a partnership between the state pension and private saving through workplace and personal pensions.
“This pledge sits alongside his commitment to use the savings from these changes to the triple lock to create a late life social care system that is free at the point of use. It also comes amid ongoing reviews of pension adequacy and the state pension age as part of a much wider debate about how the country funds longer lives.”
“The bigger challenge will be ensuring these reforms work together. With people living longer, the government will need to strike a sustainable balance between the cost of the state pension, the funding of social care and the role of private pension saving in supporting people through retirement.”
Patrick Thomson, head of research analysis and policy at Standard Life Centre for the Future of Retirement: “The triple lock has been successful in lifting pensioner incomes and has been an important contributor to improvements in pensioner living standards over the last 15 years. However, there are growing questions around its long-term affordability and how best to balance support for today’s pensioners with the interests of future generations.
“The move announced today will reduce public spending, but the government will need to keep a close eye on pensioner living standards, particularly for those most reliant on the state pension. Whatever decisions are made about how the state pension is uprated, it is important to maintain confidence in it as the foundation of most people’s retirement income.
"Many people were already uncertain about the future of the triple lock, with our Retirement Voice 2026 research finding that just 23% of 18 to 65-year-olds believed it would still exist by the time they retire, down from 29% in 2025.
“This comes at a critical time for Gen X, with many approaching retirement facing pension undersaving challenges, compounded by declining access to defined benefit pensions. The move to a double lock needs to be considered alongside decisions on the future state pension age and wider action to improve retirement adequacy, including increasing automatic enrolment contributions.”
Tim Smith, legal director at Eversheds Sutherland: “The triple lock has played an important role in improving the generosity of the state pension. However, questions have been raised about how long it would continue, given the economic pressures the government is facing and the need to fund areas such as social care. Today’s announcement creates some fiscal room for the government and, at the same time, confirms that the state pension will continue to increase year on year. However, it also increases the need to ensure people are saving enough through workplace and private pensions to supplement their state pension. The Pension Commission is looking at this issue and it is expected it will recommend that the government should increase the minimum automatic enrolment contributions in its final report, which is due next Spring. If it does, the government will be under pressure to set out a timetable for this when this will happen.”
