Andy Burnham’s pledge to scrap the triple lock could cost future pensioners thousands of pounds, new analysis has found.
The prime minister has said that the mechanism used to increase the state pension every year will be “adjusted” from 2030, meaning it will rise at a slower rate.
This could see the state pension reach £33,500 by 2050 instead of a projected £35,100, pension advisers Hymans Robertson have found – a loss of £1,600.
Under the current triple lock policy, the state pension increases in line with either inflation, average earnings, or at least 2.5 per cent – whichever is highest.
But Labour’s plans would remove average earnings as a key metric from 2030. This is usually the highest of the three measures, meaning the policy would become less generous.
Officials have said the tweaked method can still be termed a triple lock, as it has pledged to ensure that the state pension will also hold its value relative to earnings. This opens the door to ad hoc changes which could still see its value increased above inflation or 2.5 per cent in some years.
Speaking at Labour’s conference last month, Mr Burnham said: “I’ll be honest, we promised in our manifesto to keep the triple lock unchanged throughout this parliament. I will honour that promise. I will honour that promise and I will do more. That will take the state pension to a record high.
“From there, in April 2030, we will adjust it. The state pension will continue to rise every year at least by prices or 2.5 per cent. And it will hold its value relative to earnings over time so that pensioners will always share in the rising prosperity of the nation.”
The savings netted as a result of the changes – estimated to be around £50bn a year by 2049 – will help pay for an ambitious plan to create a free social care system, the prime minister added.
However, Hymans Robertson has disputed this in its analysis, finding that the true savings figure could be half of this if economic growth is low.
Calum Cooper, head of pensions policy innovation at Hymans Robertson, said: “The adjusted adjusted lock will maintain the current earnings link, which underpins the notion of fairness to pensioners. And yet, this change will also reduce long-term pressure on the government and taxpayers.
“To do this at the same time is no small feat. But the corollary of putting the state pension on a more sustainable footing is that private pension saving becomes even more important,” he told The Telegraph.
“Pensioner poverty has not disappeared and the idea that pensioners are universally wealthy masks significant disparities in retirement incomes across Britain.”
A Department for Work and Pensions spokesperson said: “This settlement is a better deal for pensioners and their families and ensures the state pension system rises every single year – by at least the highest of 2.5 per cent, CPI inflation or a new earnings link.
“We are committed to the triple lock for the rest of this parliament, which will see the new state pension rise by over £2,000 and reach a forecasted record high by April 2029. The adjusted triple lock will build on the gains the policy has made for pensioners.”
