Labour leader Jeremy Corbyn has committed to maintaining the triple lock on the state pension.
The triple lock policy means the state pension rises in line with whichever is highest from earnings, inflation or 2.5%.
Speaking at the Labour conference in Liverpool, Corbyn (pictured) pledged to protect the policy as part of an electoral pitch to the ‘older generation’.
‘We will fulfil that obligation with the triple lock on pensions protected, along with the winter fuel allowance, a free bus pass and a national health and care service that can look after you and your families with respect. That is solidarity between the generations,’ he said.
AJ Bell senior analyst Tom Selby said: ‘It is hard to put a price on the state pension triple lock because its value depends on the performance of the wider economy, and specifically earnings and prices levels.’
He highlighted that the state pension increased by 22% between 2010 and 2016, compared with earnings growth of 7.6% and consumer prices index inflation of 12.3% over the same period.
‘If the triple lock is retained over the longer-term the costs could spiral, with estimates from the independent Office for Budget Responsibility suggesting extra spending of £35 billion in today’s terms if the triple lock is retained by 2060/61, versus £15 billion under earnings indexation only,’ Selby added.
‘Aside from the billions of pounds extra the triple lock could cost the Exchequer, it is hard politically to justify increasing the retirement incomes of baby boomers at a faster rate than younger generations – especially when it is younger generations’ taxes that ultimately fund the guarantee.
‘There is also a legitimate question about whether increasing the state pension at random intervals – which is essentially what the triple lock does - is really sensible policymaking. If Jeremy Corbyn thinks the state pension level is too low, surely it would make more sense to simply raise the payment to a level he thinks is fair, and then peg that amount to earnings or prices, or both.
‘As Labour kicks into election mode it seems inevitable Labour will look to weaponise issues surrounding older people. In particular, the fact life expectancy improvements have stalled in the UK in recent years – coupled with plans to accelerate the rise in the state pension age to 68 – could be political dynamite for Corbyn and his Labour colleagues.’