What is the State Pension triple lock?

What is the State Pension triple lock?

In 2011, the Conservative and Liberal Democrat coalition government introduced the State Pension ‘triple lock’, which guarantees that the State Pension rises each year in line with inflation, wage growth or 2.5% – whichever is highest.

Does the triple lock apply to additional state pensions?

Not all state pension payments are covered by the triple lock guarantee. It applies in full to the ‘New State Pension’, which started in 2016. Yet millions of older pensioners receive a different amount from a combination of the Basic State Pension and additional earnings-related elements – known as SERPS or the State Second Pension (S2P). 

While the Basic State Pension is covered by the triple lock, the additional state pension elements are not covered. Instead, only rising with inflation.

It’s also important to note that not everyone is eligible for rises in their State Pension. It’s not applied for those who move overseas to certain countries including Australia, Canada and New Zealand.

How much will the state pension triple lock increase be next year?

Each April’s prospective State Pension triple lock uprating from the previous year is only known in October. It’s then confirmed by the government its Autumn Budget.

The inflation figure used in the triple lock is the Consumer Prices Index (CPI) for the previous September, while average wage increases relate to the May to July period. For this year, neither of these have been published yet, but we already have a good idea of the approximate level.

Wage growth is currently running at 4.6% and the relevant inflation rate is 3.8%, suggesting the triple lock could rise in line with the wage figure, somewhere in the 4-4.5% range.

If inflation remains at 3.8%, lagging wages, older pensioners receiving the state second pension many only see around 90% of the triple lock uplift for that part of their pension. However, with wage rises now cooling and inflation rebounding slightly the difference between the two measures could be marginal this time around.

Either way, it would mean someone receiving the full New State Pension can expect to see their annual payments rise by around £500 next April, roughly matching the uplift seen in 2025.

State pension triple lock concerns

The high inflation the UK has experienced since 2020 – combined with an aging population swelling the number of claimants – has meant the cost of the State Pension could be unsustainable over the long term.

Originally, it was introduced to address concerns that the State Pension was not keeping up with earnings. However, the triple lock policy has become costlier than anticipated. According to the Office for Budget Responsibility (OBR), the triple lock is now projected to be three times more expensive by the end of the decade than initially forecast, with costs expected to reach £15.5 billion per year by 2030.

Analysis from the Adam Smith Institute found the point at which the system pays out more to pensioners than is being brought in through national insurance contributions could come as early as 2035.

Eventually, action is likely to be required to manage the rising cost. This could involve modifying the triple lock – potentially by removing the 2.5% minimum increase, the wages element, or both. A move to tie State Pension increases just to inflation rather than the highest of three elements would be unpopular, but it would put the State Pension on a more sustainable track.

An alternative would be to raise State Pension age – currently 66 and is set to rise gradually to 68. The Government has, as required by law, recently launched a State Pension Age Review, commissioning two independent reports to help it consider the appropriate age for future decades. Nothing is certain, but it could be closer to 70 by the time Millennials or Gen Z are in their 60s, partly depending on how much the triple lock is watered down.

This means making your own provision is essential for retiring earlier, as well as providing income more than the State Pension for a more comfortable retirement.

Find out more: Check your state pension

State pension triple lock tax implications

A more immediate threat for many pensioners comes from tax. Pensioners with a full New State Pension face being taxed on some of this income for the first time, while others receiving larger amounts from the old system already are.

The income tax personal allowance is currently frozen at £12,570 and the full New State Pension for 2025/26 tax year is £11,973. A 4% rise next year would take the amount within a whisker of the personal allowance at £12,452 for the 2026/27 tax year, meaning that surpassing the tax-free allowance in 2027/28 tax year is a mathematical certainty unless the triple lock is changed.

The government will need to address this somehow, as it isn’t feasible to drag lots of low-income pensioners into declaring and paying tax. Having committed to triple lock guarantees for the time being, one option would be to increase the income tax personal allowance, even if just to the level of the full New State Pension to alleviate most of the problem.