Is axing the pension triple lock the right move?

This is Money Podcast

The hosts discuss the Labour government's plan to scrap the state pension triple lock by 2030 in favor of a double lock, redirecting funds toward a

Key takeaways

• Andy Burnham announced the triple lock will be replaced by a double lock from 2030 to fund social care reforms.
• The IFS estimates the current triple lock increased annual state pension expenditure by £16 billion, prompting fiscal scrutiny.

Main topics

• State pension triple lock reform
• National Care Service funding

Notable quotes

Sort of to me sounds, Lee, a bit like I'm dumping my Lambo because it's too expensive and eyeing up a fleet of private jets.

Conclusion

The episode provides actionable financial guidance for navigating pension changes and

Transcript preview

Speaker 2 (0:02) Welcome to This Is Money podcast sponsored by Trading 212. Download the Trading 212 app today and open a cashizer with promo code TIM to get the 12-month bonus promo rate of 5.01%. Terms apply. I'm Georgie Frost and joining me and lead voice today is Helen Crane. And goodbye expensive triple lock. Hello a new, likely even more expensive, national care service. From 2030, the state pension is changing to fund social care. So how will it work? And is it the right move? Also today, could the council take over your empty buy-to-let? Helen explains EDMOs and who could be stung. Fancy working for yourself? We reveal the 10 most in-demand self-employed roles. Plus, what to do if you find out a colleague is being paid a lot more than you for doing something similar. And no more sickly-smelling cloud puffs in your face as you walk down the street. We can but hope. A new vape tax comes into force this week. It's what's changing and how much. costs will rise. Don't forget you can stay up to date with all the latest breaking money news. Just go to thisismoney.co.uk or download the app. But first, goodness, goodness me, it actually happened. Say what you like about Andy Burnham, but we on this pod have been wondering. for a while, which politician would be brave enough to take on the triple lock. But here we are. So from 2030, the earnings part of the state pension commitment is being dropped, with any money saved, and I use inverted commas there, going towards a new social care service. Sort of to me sounds, Lee, a bit like I'm dumping my Lambo because it's too expensive and eyeing up a fleet of private jets. Anyway, before we get to that, the triple lock, what is it? Why was it brought in? What has it done? Sort of give us a little potted history and take us up to this point now. Sure Speaker 3 (1:52) thing, Georgie. Yeah, I mean, as you say, what a bold move by Mr. Burnham to sort of came out there. And there was lots of murmurs in the morning ahead of his TPM conference that there was some sort of triple rock announcement inbound. And then, boom, there it went. hush around the newsroom and then some bustle of excitement as it all sort of kicked off. So yes, the triple lock has become a very hot political potato, I would say, since it was introduced in the 2011-12 tax year by the coalition government, when it was the Conservatives and Liberal Democrats. They brought in this promise that the state pension would rise by the greater of inflation, 2.5%. or annual earnings growth, whichever figure was highest. At the time, state pension, in a way, it was trickling high. It was really not keeping pace with anything that was going on. It looked very meagre, and there was lots of unrest about it. It was one of the key parts of that coalition government. So what has it done to state pension? We only have to look back over the table of the years. For each April, it goes up by one of those measures. In recent years, it's become more of a headache. because of a bit of a skewing of the figures, I would say, in the aftermath of the pandemic. And what I mean by that is, for example, in April 2023, it went up by 10.1%, which was the inflation rate at the time. Average earnings then were at 5.4%, but 10.1 % was an almighty kind of rise when you look back over previous rises, which essentially were just not anywhere near as generous as that. 8.5 % in April 2024, again, earnings. And then it's been Speaker 2 (3:32) a little bit less since, 4.1 % in 2025 and 4.8 % in 2026 earnings. Speaker 3 (3:37) So those last three have been earnings. What it's done is the triple lockers, since its creation in April, since it came in April 2011, up 89%. At the same time, CPI is up 60%. Average earnings up 66%. It's been a pretty good deal, I would say, for pensioners. That's why this kind of removal of the sticking plaster of the triple lock has been such a big deal. And do you know what, Georgie? I think we've spoken about it a lot in the podcast, probably over the past decade, to be honest. It always feels like in one form or another, it was on the chopping block. And this week, Mr. Burnham has decided to make it a, well... If he's still around in power, because this is from 2030, don't forget we're going to have a general election before this. We will have what essentially is a less generous kind of version of this, where it will be a double lock when the earnings element is removed, but not fully removed, because it was talking about potentially either this automatic annual link to average wage growth being removed, but kind of... a looser, I would say, long-term link assessed over time to ensure that the pension retains its overall value relative to the economy. So basically what he was saying is that if the economy's doing well and wage growth is high, it's not automatically not going to go up by a bit more than what's being kind of said here. But fundamentally, it looks like it's the end of the triple lock as we know. Speaker 2 (5:03) Yeah, to a sort of double lock. Almost. But, you know, the 2030 is quite significant, obviously, isn't it, Lee? Because it wasn't just the Labour Party, but I believe the Conservative Party before that, they've kept it in their manifestos. This will be the end of his parliament, as it were. So he can sort of scrap that manifesto, do another one. So we don't know exactly really what's going to happen, but it's paving the way to suggest that, firstly, this needs to change because it's very expensive. That was the big criticism of it. But also what's not been spoken about so much, but that big elephant in the room, social care. So it is addressing something that absolutely needs to be addressed. But I just want to, before we get there, Helen, why is this so controversial? And how much extra was the triple lock costing? Or is it costing? Speaker 1 (5:54) It is very controversial, as you say. I mean, I'm kind of eating my words because I think I remember the last time I was on the podcast saying, God, I'm sick of talking about whether the triple lock will be scrapped because it's never going to happen. So I feel a little bit stupid now. You're right. I mean, the triple lock has been an incredibly sort of expensive policy to maintain, but obviously incredibly popular with pensioners. I think it had to end at some point. The stat that has been bandied around this week, this is from the IFS, is that the old triple lock has increased annual state pension expenditure by 16 billion. It's hugely costly. But then, as you say, how much is this social care free at the point of use system going to cost? I mean, presumably that's going to cost, as you say, much, much more. Who knows, really? I think that's the thing that's got to be. ironed out you know it's very scant the he said this is going to pay for social care but how is that going to work you know that's obviously something that could benefit the same people that are kind of losing a triple lock and this is a huge issue you know at the minute I think you have to fund your own care if you have 23 000 pounds in in assets and that includes your So that means that a huge number of older people who aren't necessarily wealthy end up funding their own care essentially in full. So it's a problem that I think many people would like to see addressed. But it's kind of a lottery, isn't it? Because you don't know whether you're going to need social care. It's all essentially down to luck, how long you live, how good your health is. So it's creating some kind of parity. in that sense. But I do think, you know, there's also, I've spoken to some people in my family who are pensioners this week, and they are not, not happy, to put it quite mildly, this idea that the triple lot could be scrapped. And I think people maybe see it as the first step in wider changes to the state pension. And you know, people do rightly feel like they've kind of paid into this all their lives, they've worked hard, and they've... They sort of paid their national insurance and they think they deserve to get something back in their retirement. And you can see why people feel like that. Speaker 2 (8:11) Just a quick one. Some of what I'm about to say for this segment is going to be related to, I did a post on social media and so got quite heated. And so I want to pose some of those issues to you. And the first one, Helen, if you don't mind, was someone asked me, I've done a bit of, you know, back of a stamp maths. I didn't, they did. And they worked out that. young people would be 50 grand, let's say, worse off. But why are young people supporting scrapping the triple lock? Now, I have my views, but Helen, I ain't young. So why do you think that, as the younger one here, that young people are so anti the triple lock? Speaker 1 (8:48) Oh, you're flattering me, Georgie. I'm not that much younger than you two. But yeah, you're right. I think young people are sort of cheering. this. We actually have a column on our website this week from our colleague, Rachel Rickard-Strauss, who's saying that young people end up being the worst hit by this because obviously, if the state pension stops going up in these higher increments every year, then by the time they get to receiving the state pension, then the cumulative effect of that over years and years will actually be even bigger, which is a good way to think about it. I think it's a classic thing of young people just can't even fathom ever being a pensioner. They think it's so kind of far away. And I think it is partly a financial education thing as well. You know, we don't teach young people about pensions and retirement. And, you know, I was probably guilty of this when I was young. You just think it's going to somehow be fine. You think, you know, if you work hard and, you know, your retirement is just going to be all right. And you don't really think about, oh, how much will my state pension be? And what's going to happen between now and then? I think... There's just this kind of sense of injustice that younger people have. They see their parents and grandparents paying off their mortgage, living in big houses. You know, that old cliche of you bought a house for a fiver back in 1970 something. You know, obviously that's an exaggeration. But, you know, I think young people do look at... their sort of financial situation and that of their parents and grandparents. And they do rightly feel a bit hard done by, you know, if you look at things like the jobs market at the minute as well, AI sort of taking young people's jobs, it is super tough. You can see why young people look at pensioners getting these fairly sort of chunky increases every year and think, well, why can't some of that money go towards helping us? And, you know, it's not just really young people, you know, sort of young families are struggling with a lot of different costs. But I think maybe young people forget to think that they will one day get there as well. I Speaker 2 (10:46) think part of it also, though, is a bit of trust that maybe one day it ain't going to be there for them anyway. So they're like... Trust, I think. But Lee, throughout that, very briefly, you were nodding along. Speaker 3 (11:00) No, I certainly agree with what Helen says. I think there's this misconception amongst the young that basically everyone that's older owns their own home, got lots of money. And, you know, in some circumstances, that is true. You know, there are some older people that are doing well for themselves, but a lot of them have worked hard all their lives and are kind of in that position on merit. And then you have a set of pensions that, you know, essentially live on the breadline. And the state pension is their only income. And rightly or wrongly, they believe that state pension was their blanket, their security for retirement. Whereas I think we are neither old nor young on this podcast. We're in the middle kind of ground. So we kind of get it. It's not that long ago that we were young and we're kind of looking into the future and knowing it's not that long away now till we're getting older. So we're in that position where I think we are more in control of our pensions and our retirement. In terms of private pensions, there's a lot more information out there, a lot more of a kind of pressing need to say you should be saving into a private pension. And actually, if you are someone that's in their 20s, 30s or 40s, I mean, really, you're going to be needing to boost your pension payments probably by 1%. to make up for the shortfall of this triple lock