New DWP update on future plans for State Pension Triple Lock
Under the Triple Lock, the New and Basic State Pensions increase each year in-line with whichever is the highest between average annual earnings growth from May to July, Consumer Price Index (CPI) inflation in the year to September or 2.5 per cent. Over the 2025/26 financial year, the State Pension will cost the UK Government an estimated £145.6 billion.
However, Work and Pensions Secretary Liz Kendall announced on Monday that a long-term commitment to theTriple Lock is not in the scope of the resurrected Pensions Commission. The Commission last met in 2006 to tackle the issue of working age adults failing to put enough money into their retiremen t savings.
Experts have warned that people looking to retire in 2050 are on course to receive £800 per year less than current State Pensioners.
The commission is expected to provide recommendations for how to boost retirement income in 2027.
Ms Kendall was asked if she thought it was impossible to maintain the Triple Lock guarantee given its cost and if she could guarantee it would be in Labour's next manifesto.
She said: 'The Triple Lock is out of scope of the commission. We've got a very clear commitment to that for the entirety of this Parliament.
'And what we're asking the commission to do is genuinely look medium to longer term, the middle of this century, and how the state pension and second pensions work together.'
The Office for Budget Responsibility recently said that the Triple Lock has already cost three times more than initially expected and suggested it was unaffordable in the long term.
The Labour Government has previously pledged to honour the Triple Lock for the duration of this Parliament.
Ms Kendall also confirmed that the next statutory UK Government review into when and how to raise the State Pension age will start work now.
She explained: 'Unless we act, tomorrow's pensioners will be poorer than today's, because people who are saving aren't saving enough for their retirement.'
Lowering the age and earnings threshold at which people are brought into auto-enrolment and as well as looking at easy-access 'sidecar' savings accounts will be among the options the commission looks into.
The Department for Work and Pensions (DWP) said 45 per cent of working-age adults were putting nothing into their pensions.
The previous pensions commission recommended automatically enrolling people in workplace pensions, which has seen the number of eligible employees saving rise from 55 per cent in 2012 to 88 per cent.
DWP analysis suggested 15 million people were under-saving for retirement, with the self-employed, low-paid and some ethnic minorities particularly affected.
Around three million self-employed people are said to be saving nothing for their retirement, while only a quarter of people on low pay in the private sector and the same proportion from Pakistani or Bangladeshi backgrounds are saving.
Women face a significant gender pensions gap, with those approaching retirement in line to receive barely half the income that men can expect.
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