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State pension triple lock shock as Labour pledge puts Tories on the spot | Personal Finance | Finance

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Reports suggesting that Labour has committed to retaining the triple lock if it takes power are a much bigger deal than they would have been just a year or two back. Its poll lead may have narrowed but a Starmer victory still seems likely so this appears to secure the state pension uplift mechanism through the life of the next Parliament.

Last September, Labour’s shadow deputy prime minister Angela Rayner refused to commit to the state pension triple lock, which benefits more than 12 million retirees.

She insisted the party would not make unfunded spending commitments due to the state of the economy.

I don’t know what’s happened since because the UK economy is still a disaster zone, but suddenly Labour has discovered it can afford the triple lock after all.

Under the triple lock, the state pension increases every year in line with wages, inflation or 2.5 percent, whichever is highest.

In April last year, the mechanism handed pensioners a 10.1 percent pay rise, based on inflation, while in April pensioners are set for an increase of 8.5 percent, this time based on wages. 

No wonder pensioners love it.

Many were up in arms when Rishi Sunak scrapped the mechanism for one year, after the wages snapped back after the pandemic.

It looked set to become a major battleground for the election, with the Tories also refusing to commit to its future.

Now Labour has acted, putting Prime Minister Rishi Sunak on the spot.

The triple lock has lifted 200,000 pensioners out of absolute poverty since being implemented by the coalition government in 2011, but it doesn’t come cheap.

The state pension costs the country £110billion a year. That’s almost half the country’s total spending on benefits.

Many say the state pension shouldn’t be called a benefit but an entitlement. Unfortunately for them, that’s not how the Treasury sees it.

By 2050, the Office for Budget Responsibility reckons the triple lock commitment could add anything between £5billion and £40billion a year to today’s bill.

The only thing stopping politicians from scrapping it so far is that pensioners are more likely to vote for than any other age group, and they are more likely to vote Tory, too.

So it’s hard to see Sunak going into an election pledging to scrap the triple lock. It could prove suicidal on polling day.

Once Labour confirms that it is behind the triple lock, I would expect the Conservative Party to follow, in a victory for pensioners.

Don’t relax yet, though.

READ MORE: DWP state pension triple lock alert as MP suggests reform to protect pots

The state pension triple lock will remain under almost constant attack, with politicians, think tanks and analysts repeatedly claiming the country can’t afford it as the population ages.

Some want the state pension to be tied to earnings alone. Others say it should be linked to earnings. Few defend the 2.5 percent uplift, which acts as a backstop in years when inflation and earnings are low.

Any changes would save taxpayers billions but cause huge pensioner insecurity.

The alternative is to keep hiking the state pension age. Some experts claim it should be raised to 70 or 71, but there’s a limit.

At this rate, many will never benefit from the triple lock because they’ll die before receiving a penny in state pension.

Labour is forcing Sunak’s hand. I bet he won’t dare scrap the triple lock now, which should continue into the next Parliament. However, pressure to get rid of it won’t die, so pensioners will have to remain vigilant.

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