Prime Minister Andy Burnham announced plans for an adjusted triple lock pension policy following the general election, which is expected to have significant implications. Burnham's approach indicates a shift away from the traditional triple lock, which ties pension increases to earnings, inflation, or a minimum of 2.5%. Under the new plan, the state pension will increase by either the rate of inflation or 2.5%, whichever is higher, while the link to average earnings will be removed on an annual basis and reflected over time. This change aims to maintain the state pension's share of earnings at a record level projected for 2030.
The Institute for Fiscal Studies estimates that if this adjusted policy had been in place since 2011, it would have reduced the annual cost of the triple lock by more than half, saving approximately £9 billion each year. Government sources project that the new policy will save around £15 billion annually by 2040. The decision is seen as a political gamble, as it requires support from ministers and MPs, who will need to vote on the proposed changes. Burnham's announcement is part of a broader strategy to engage with bond markets and address other significant policy issues, including energy and post-Brexit matters.