The state pension triple lock “has to stop” and should be replaced with a system where it is pegged to a fraction of average earnings, one of the UK’s most respected economists has said.
Paul Johnson, the former director of the Institute for Fiscal Studies (IFS) think-tank, said that politicians had to stop pretending that the mechanism “can carry on forever” and warned that without change it would end up consuming the British economy.
Under the triple lock, the state pension rises in line with whichever is highest of inflation, wage increases or 2.5 per cent.
The policy has ended up being much more expensive than it was expected to be when it was introduced by Conservative chancellor George Osborne in 2011, with the Office for Budget Responsibility (OBR) forecasting that by 2030 it will cost £15.5bn a year – three times its original estimate.
The OBR predicted in July that when combined with the UK’s ageing population, the triple lock will push up spending on the state pension from its current level of 5 per cent of gross domestic product to 9 per cent by 2075.
