State pension triple lock scrapped for British people in one area and more could follow
A woman’s hand holding fifty-pound banknotes and a red purse.
The state pension Triple Lock system is being removed for some people in the British Isles. (Image: Getty)
The Isle of Man will be the first place to stop using the Triple Lock for state pensions. There are concerns that other areas might follow.
The Isle of Man is not officially part of the UK but is a Crown Dependency. People there are considered both British and Manx.
The island has decided to end the Triple Lock for those who retire after 2019. This is because the pension fund could run out in 25 years if no changes are made.
The Triple Lock system ensures pensions increase each year by the highest of three options: wage growth, inflation, or 2.5%. Without it, pensions will now rise by either 2% or inflation, whichever is higher. This is called a ‘double lock’ because the wage growth part is removed.
The change will be finalized in February.
People retiring after 2019 will see their pensions rise by 2.2%, while those still on the Triple Lock will get a 4.1% increase. This shows how losing the Triple Lock could leave retirees worse off.
There are worries that the UK might also remove the Triple Lock in the future.
The Conservative leader, Kemi Badenoch, has suggested making state pensions means-tested (based on income). Although the current Labour government has promised to keep the Triple Lock until 2028, the former pensions minister who introduced the system said it won’t last forever.
Sir Stephen Webb, who created the Triple Lock, told BBC Radio 4: “It’s needed for now, but not indefinitely.”
The Office for Budget Responsibility has called the Triple Lock a “fiscal risk” because it can lead to higher pension costs over time.
The Institute for Fiscal Studies says the Triple Lock makes it hard to plan government finances. This is because it’s difficult to predict wage growth, inflation, and how many people will claim the full state pension.
By 2050, the cost of the Triple Lock could range from £5 billion to £45 billion per year due to these uncertainties.
The OECD (Organisation for Economic Co-operation and Development) has suggested that pensions should increase based on average earnings growth and inflation, with extra support for poorer retirees.
