A renewed call has been made to end the ‘generous’ but ‘unfair’ state pension triple lock system by a leading think tank.

The triple lock, which the Express has campaigned to protect, was introduced in 2012 as a means of guaranteeing that state pension payments from the DWP are increased each year by one of three metrics: inflation, wage growth or a flat 2.5%, whichever is highest.

But today, Wednesday June 10, the Resolution Foundation has issued a detailed new report setting out why it thinks the case for the triple lock has ‘now run out’ and was ‘always poor’ as a method of reducing pensioner poverty.

It points to the estimated £80bn extra cost of delivering the triple lock in future, while also outlining how a typical pensioner household now has ‘the same level of income’ as a typical working-age household, and the triple lock is increasing earnings for pensioners faster than for workers.hem."

The Foundation’s report says: “There is not a strong case for continuing to increase state support for pensioners faster than the wages of typical workers – the inevitable practical effect of the triple lock. Even if you disagree, the triple lock is also a bad way to increase the relative value of the State Pension. Because it uprates every year by the highest of earnings, prices, or 2.5%, the value of the State Pension depends not just on the level of earnings and inflation but also on how volatile they are. The OBR projects that State Pension spending will rise by a further £80 billion over the next 50 years, but warns it could easily be £40 billion higher or lower depending on economic conditions."

It adds: “The New State Pension is already at around 30 per cent of median full-time earnings, close to the level recommended by the original Pensions Commission in 2005. The current Pensions Commission should now give its definitive view on the appropriate level. Our view is that level has now been reached, and politicians should find the courage to replace the triple lock with a policy that is transparent, predictable, and fair across generations.”

The think tank also pointed out that it is ‘unfair’ that pensions continue to rise faster than earnings.

It continues: “Pensioners have seen three times as much living standards growth over the last twenty years as non-pensioners. When the first Pensions Commission was in place, the typical pensioner had a lower income than the typical non-pensioner, but that has not been the case since 2011-12. And pensioners are now less likely to be in poverty than the rest of the population, and half as likely as children. On what basis, then, should pensioners see their support from the government rise faster than the wages of the typical worker in the economy?”

Furthermore, the cost to the economy is ‘financially unsustainable, it sets out: “As well as being unfair, it is also not fiscally sustainable for the State Pension to rise forever by more than the earnings of a typical worker. Those earnings determine a big chunk of tax revenue, so accelerating support from the state at a faster rate than the revenue it receives would require a continual squeeze on all other elements of public spending (or exploding public debt).

"What makes the fiscal arithmetic worse is that we have an ageing population, with the number of people aged 16-64 for every person aged 65+ projected to fall from 3.3 to 1.9 between 2025 and 2075. We are currently spending 5 per cent of the size of the economy (or £154 billion or 11 per cent of government spending), on the State Pension. That’s 23 per cent more as a share of the economy than we spent in 1978-79, despite rises in the State Pension age in that time, and the real-terms cost is set to grow by a further 50 per cent, or £80 billion, over the next 50 years.”

Instead, the report’s authors suggest that the triple lock be replaced by a ‘smoothed earnings link’. This would mean state pensions are not automatically uprated for earnings, and instead, increase on a baseline of average earnings measured against inflation, a move which would cut £650M a year from the cost of delivering state pensions while still protecting its real terms value.

Alternatively, the other two elements be scrapped and only the flat 2.5% increase is retained, which would mean earnings growth is not passed onto the pension in years where earnings exceeds this.

Controversially, the Foundation adds that it is ‘time’ that politicians stop ‘favouring’ pensioners over workers, adding: “Politicians owe us an answer on what they see as the appropriate level of the State Pension, rather than leaving it to random economic variation. “Our answer is that, given the state of the public finances and the relative position of pensioners compared to non-pensioners, the time to favour pensioners over typical workers is over. But whatever the right level, the time has surely come to move away from a ratchet that leaves the State Pension a function of economic volatility.”

Lily Megson-Harvey, Policy Director at My Pension Expert, reacted to the report. She said: “The Resolution Foundation is right to raise questions about the long-term sustainability of the triple lock, but for millions of pensioners this is larger than academic debate, it's about financial security."

"Many retirees are currently grappling with rising living costs and uncertainty about how long their savings need to last. Scrapping the triple lock without a clear alternative risks undermining confidence in retirement planning when certainty is needed most."

"People deserve confidence that the goalposts won't keep moving as they approach retirement, giving them the certainty needed to plan for later life and make informed decisions about their financial future. The Government must work with the industry to focus on long-term sustainability and fairness, ensuring that retirees are protected. And with any changes, there must be a clear communication strategy to give people the much-needed confidence that their future finances will continue support them."