Andy Burnham announces the abolition of the triple lock on pensions

In his keynote speech to the Labour Party Conference the new Prime Minister Andy Burnham announced that the triple lock would become a double lock from 2030 to fund a new National Care Service which like the NHS will be free at the point of delivery. He also said that “it will hold its value, relative to earnings over time so that pensioners will always share in the rising prosperity of the nation” and that pensioners who rely solely on the state pension would no longer face care charges.

Background

The triple lock mechanism means that the State Pension increases by the highest of 2.5%, price inflation as measure by CPI and earnings growth per the ONS Average Weekly Earnings measure of total pay including bonuses across the whole economy.

Since 2011, the basis used for uprating has been in line with RPI once, in line with CPI five times, in line with Earnings Growth six times, and increased by the 2.5% minimum four times.

At the last General Election in July 2024 both Labour and Conservative parties pledged to maintain the Triple Lock for the whole parliament.

However, Andy Burnham has now announced that the Earnings Growth element, which has been the driver for the last 3 years, will no longer be used after 2029. The aim is to reduce the increases to a more manageable level and provide the headroom for the new care system.

What will it mean for you?

At this point in time, it is impossible to predict the impact this will have on future increases in the State Pension and what it means for those who rely on this as their main source of income.

However, it may tempt some to consider paying more into private pensions now to ensure a comfortable retirement, when the time comes. Of course, the other changes affecting the taxation private pensions that are on the horizon (imposing Inheritance tax from April 2027 and restricting NIC relief on salary sacrifice contributions from April 2029) may temper this who are looking at it from a tax angle.

Balancing all of these competing issues is certainly going to keep the financial planners busy over the coming months who are going to need to navigate the new landscape.

Should you wish to discuss the tax impact of the upcoming changes, please contact Gravita’s tax consultancy team who will be happy to advise.