The UK’s Conservative Party and the Democratic Unionist Party (DUP) said there would be no change to the pensions triple lock, despite the Conservatives having said that it would eliminate it in its manifesto.
The decision was revealed in the confidence and supply agreement reached between the two parties. Because the Conservatives didn’t achieve a majority in the June snap elections, they had to make a deal with the DUP and its 10 parliamentary seats to form a coalition government.
The triple lock, which was introduced in 2011, guarantees that the basic state pension will rise by the largest among the rate of inflation, average earnings growth, or 2.5%. In its manifesto, the Conservatives called for the triple lock to expire in 2020, at which time a double lock would be introduced. The result of this would be that pensions would increase in tandem with the highest of either the earnings that pay for them, or inflation, while removing the 2.5% option.
According to The Institute for Fiscal Studies (IFS), pensions have benefited significantly from the triple-lock feature. The IFS said that in the six years ending April 2016, state pensions have increased by 22.2%, compared to 7.6% growth in earnings, and 12.3% growth in prices during the same time span. As a result, the value of the basic state pension is up to its highest share of average earnings in nearly 30 years.
However, just last week, David Gauke, the new secretary of the Department for Work and Pensions, told a group of journalists at Westminster that the pension triple lock was unsustainable, and that the government would eventually have to do away with it.
“If you look at what the triple lock does, it has a ratchet effect, because pensions go up by the higher of inflation or earnings,” said Gauke. “Over a period of time, it will mean that a greater and greater share of GDP goes to paying the state pension, even without any increases in pensioner numbers … do I think that in 10, 20, 30 years’ time, we will still have a triple lock? I cannot see in all honesty how we can.”