State pension triple lock 'major changes' warning issued

Changing the triple lock policy could devastatingly impact pensioners, a retirement expert has warned. With Government expenditure on state pensions continuously climbing, multiple specialists have suggested that Labour may need to ditch its pledge to preserve the triple lock throughout this Parliament.

The system ensures state pension payments rise each April, matching whichever is the highest between average wage growth, inflation or 2.5%. Because of this arrangement, state pensioners received a 4.1% increase to their payments in April, with the full new state pension climbing from £221.20 weekly to £230.25 weekly.

Lily Megson-Harvey, policy director at advisory group My Pension Expert, said: "The triple lock is clearly an expensive policy and has been a challenge for successive Governments. However, the Labour Government must be cautious in how this is tackled as major changes will be difficult to implement without negatively impacting retirees."

Suggested replacements for the triple lock include a system where payments increase in line with earnings, or a more gradual average rise over multiple years.

Others have indicated that the Government could examine modifying tax relief in different sectors, enabling them to maintain funding for the state pension expenditure. However, Ms Megson-Harvey contended the Government should embrace a long-term outlook regarding the state pension.

She stated: "This Government needs to work closely with the industry on a sustainable solution that protects the most vulnerable in society. It's easy to fixate on the political football of the triple lock - we also need to consider wider policies that will support pensioners and savers. We want to see the Government focusing on long-term change rather than tinkering with policies and adding further layers of complexity within the pensions system."

Exploring other aspects of pension reform, the expert suggested raising the auto-enrolment minimum contributions would be a "sensible step."

At present, employees must be enrolled in a workplace pension scheme and pay at least 8% of their earnings into the fund. This usually involves a 5% contribution from the employee and 3% from the employer, although these amounts can vary. Ms Megson-Harvey also cautioned that there is a "widening pension engagement gap" that requires urgent attention, as numerous individuals show little interest in their retirement funds.

She warned: "Access to financial education and advice is an overlooked issue, with only one in ten consumers currently seeking pension advice. We need to see a step change from the Government in how it helps people understand and engage with their pension options so their money works harder for them in retirement. This includes publishing the long-delayed pension dashboards as soon as possible."

The upcoming pensions dashboard will consolidate all your private pensions and state pension entitlements in one place.