Faisal Islam: Triple lock move is significant, but it's a gamble
Summary
Prime Minister Andy Burnham announced a major change to the way the state pension is increased each year. Instead of the current “triple lock” system that includes earnings growth, pension rises will now be based only on inflation or 2.5%, whichever is higher, with earnings growth considered over a longer time. This change aims to save the government billions over the coming decades.Key Facts
- The current triple lock increases state pensions by the highest of inflation, 2.5%, or average earnings growth annually.
- Burnham’s plan removes the yearly link to earnings growth, keeping only inflation or 2.5%, whichever is higher.
- Earnings growth will still be considered but smoothed over many years to keep pensions stable relative to wages by 2030.
- This policy change is expected to save the government around £9 billion per year if it had started in 2011.
- Actual savings are forecasted to reach about £15 billion a year by 2040.
- The change requires support from MPs and will involve a vote to officially amend the pension system.
- The government hopes this move shows financial responsibility to markets and the public.
- It is part of wider plans involving social care funding and other economic policies post-Brexit.
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