The Institute for Fiscal Studies (IFS) has issued a warning that the state pension in the UK would need to increase to 74 by 2069 to sustain the triple lock promise. This is due to concerns about the affordability of the government policy as the population ages. Currently, the state pension age for both men and women is 66, gradually moving towards 68.
The triple lock mechanism ensures that the state pension rises annually by the highest of inflation, wage growth, or 2.5%. However, without adjustments to the state pension age, the IFS estimates that maintaining the triple lock could cost taxpayers up to £40 billion per year.
To address this, the IFS suggests a double lock approach, tying state pension increases to either wages or inflation. Chancellor Rachel Reeves has committed to retaining the triple lock until 2029.
According to the latest IFS report, significant increases in the state pension age would be necessary to control state pension spending relative to national income. The report indicates that to limit public spending on the state pension to below 6% of national income while upholding the triple lock, the state pension age would need to reach 69 by 2049 and 74 by 2069.
Mike Ambery, Retirement Savings Director at Standard Life, concurs with the report’s findings, highlighting the need for tailored solutions to address under-saving and pension gaps, especially for self-employed individuals and younger workers. Striking a balance between saving adequacy and affordability will be crucial.
The state pension age is already set to increase to 67 between 2026 and 2028, with a further rise to 68 anticipated between 2044 and 2046. The state pension is distinct from private or workplace pensions, and individuals can check their state pension age and forecast online.
There are two types of state pension based on birth dates, with different rates for the new state pension (for those born on or after April 6, 1951) and the basic state pension (for those born before April 6, 1951). The amount of state pension received is contingent on one’s National Insurance record, with 35 qualifying years needed for the full new state pension and ten years for any entitlement at all.
