Why the general election might impact how the State Pension increases

As we approach the general election, State Pension provision and in particular how it increases each year, is a topic for political debate, especially as the leading parties have already declared different pledges in this regard.

Currently, annual rises in the State Pension are decided by whatever is the highest of:

• Price inflation;

• Average earnings growth; or

• 2.5 per cent.

This policy is what is more commonly referred to as the ‘triple lock’ policy. Official forecasts predict this policy will add at least £15bn to the long-term cost of State Pension provision by 2050.

Labour has already confirmed that if they are elected they will retain the ‘triple lock’ policy until 2025. The Conservatives however, despite promises to keep the guarantee until the next election (presumed at the time to be in 2020), have refused so far to renew their commitment to the ‘triple lock’ policy beyond the snap general election next month (June 2017).

It is widely anticipated that if the Tories are re-elected they will seek to downgrade the ‘triple lock’ policy to a ‘double lock’ policy, which would effectively remove the 2.5% minimum increase from the ‘triple lock’ policy. Sir Steve Webb, (former pensions minister) who introduced the ‘triple lock’ policy, has suggested it could be adapted to apply only to those receiving the basic state pension and not those receiving the new state pension.