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What is the triple lock pension and how does it affect me?

The state pension triple lock

The ‘triple lock’ is a safeguard that applies to the UK state pension, to ensure it doesn’t lose value because of inflation.

In the past, there have been calls to scrap or modify the triple lock, which intensified during the Covid-19 pandemic, amid fears that it could become too expensive.

Here’s how the triple lock pension works, what it means for you and your retirement income, and what the consequences might be if it were scrapped or amended.

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The triple-lock state pension

A triple lock was introduced to the UK state pension in 2010 as a guarantee that it would not lose value in real terms and that it would rise at least in line with inflation.

The three-way guarantee means that each year, the state pension would increase by the highest of the following three measures:

  • Average earnings
  • Inflation as measured by the Consumer Price Index (CPI)
  • 2.5%

In other words, if average earnings were to increase by 3%, the state pension would also rise by 3%. But if neither average earnings or inflation rises by over 2.5%, the state pension will still grow by this amount.

What does the triple lock mean for me?

If you are currently receiving the state pension, the triple lock ensures that your spending power will not diminish over the course of your retirement (for as long as all three guarantees remain in place).

It also means that if inflation is below 2.5% (which it hasn’t been for a while), your pension increases will beat inflation, improving your spending power.

Why is the triple lock good for pensioners?

It’s clearly important for pensioners that the state pension increases over time.

Retirement can last around 20 years or longer, and over such a length of time, prices can increase dramatically.

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Will the triple lock end?

The state pension triple lock has proved to be a burden for successive governments, as it has been costly for the taxpayer.

On several occasions, the government has considered modifying the triple lock, for example, to replace it with a double lock based on increases in earnings or CPI (whichever is the highest). But, this has not been a popular idea with voters.

As a General Election is coming up within 18 months, it’s highly unlikely the triple lock will change, particularly as the cost of living crisis and high inflation continue.

However, if the state pension continues to rise at a fast pace, this could become more difficult for the government to justify in the future.

What would happen to my state pension without the triple lock?

The loss of the triple lock would not have a huge immediate impact on current pensioners, especially if it were replaced with a double lock.

The level of the state pension would still rise with inflation – it just wouldn’t exceed it.

A more pessimistic scenario would be for the state pension to have only a single lock, linked either to earnings or the CPI, but not both. In this case, pensioners’ spending power might deteriorate over the medium to long term.

The worst-case scenario would be the complete loss of any lock, and a return to the times when increases in the state pension were simply made at the whim of the Chancellor in the annual Budget. This is unlikely, but it can’t be ruled out in the long term.

Ironically, those most likely to be hit hardest by the removal of the triple lock are younger generations. Those currently around 10 to 20 years from retirement might feel more impact when the time comes.

What can I do to safeguard my retirement income?

If you are not yet drawing your state pension and are still working, it is a good idea to save as much into workplace or personal pensions as possible.

Given that the state pension is far from generous in any case, and the age you can receive it continues to rise, it is sensible not to rely too much on it.

The state pension should be seen as a supplement to private pension savings. Find out how much retirement income you might receive from your private pension and how to boost it using our Pension Calculator.

If you found this article helpful then you might also find our free pension guide and article on how to find or trace a lost pension informative, too.

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About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.