Aegon has urged politicians to address the long-term sustainability of the State Pension triple lock, warning that the next Prime Minister must not sidestep the issue.
On Monday, Sir Keir Starmer announced his resignation, with Andy Burnham widely tipped to become the next Prime Minister.
However, the political churn has fuelled speculation over what policy changes might take place.
Steven Cameron, pensions director at Aegon, said growing scrutiny of state pension funding should prompt a wider debate about the future of the triple lock.
Under the triple lock, the State Pension increases each year by the highest of earnings growth, price inflation or 2.5%. While remaining popular amongst pensioners, questions have been raised around its future sustainability.
Cameron said: “The next Prime Minister, whether or not Andy Burnham, will inherit many pressing challenges and on that list is the future of the State Pension triple lock.
“While avoided by successive governments, politicians across the spectrum as well as think tanks are now increasingly questioning its long-term future and today’s political change creates the opportunity for an open and honest debate.
“Importantly, it’s not a simple case of keep it or scrap it – there are other options worthy of proper consideration. What’s needed from all major political party leaders is a longer-term vision for how the State Pension can remain fair, affordable, and sustainable not for the next three years but for the next 30 years and beyond.”
With an ageing population and fewer younger workers supporting more pensioners, Cameron warns that the current system is already “creaking at the seams” and without reform, the triple lock will place an unprecedented burden on working-age taxpayers, raising questions around intergenerational fairness.
“Aegon has long supported an amended form of the triple lock which would retain the principle of pensioners sharing in rises in the nation’s prosperity while introducing greater stability. Recently, year on year inflation and earnings growth have been unpredictable and volatile.”
Cameron said a fairer approach might be to provide inflation increases as a minimum with a further uplift if earnings growth has exceeded inflation, for example, over three years.
He added: “This would smooth out volatility, provide greater predictability for public finances and preserve fairness for pensioners. Done properly, reform could be the saviour of the triple lock’s aims rather than an end. The debate now needs leadership, honesty and a genuine commitment to finding common ground across both political parties and generations.”
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