Triple-Lock is doomed

 The Triple-Lock has had its day.

    Some people [1] are gunning for the so-called Triple-Lock on the State Pension. The triple-lock, introduced in 2011, ensures that the basic statuary old-age pension rises each year by an amount that is the greatest of: (a) the CPI inflation, (b) average earnings growth, or (c) 2.5%. 

    I agree it must be revised. I have never understood how the third element found its way into the formula. Why should pensions rise when average wages did not? And yet, from the data in Table 1 of reference [1], the 2.5% rule was used to raise pensions faster than average wages in 2013, 2015, 2017 and 2021. Why should pensions rise in those years? There is no money with to pay them. So, let us dispense with the 2.5%; and look at the double-lock

    One might argue that pensions will not go down in real terms if they are corrected for inflation, i.e. tied to the Consumer Price Index (CPI).  And that protection might suffice. Yet, if the hoped for 'growth' of the economy were to occur repeatedly for a few years, wages could rise faster than inflation; i.e. could rise in real terms. And it might  be argued that, in fairness, pensioners should join in the fun. Generous fairness. And, though there are years in the quoted Table [1] in which average weekly wages rise more slowly than inflation, (e.g. in 2011, 2012, 2016, 2022, 2023), I think it is clear that, in the long term, average wages out-strip inflation, and indeed contain inflation (as that is a dominant element in driving wage rises). 

    At this stage we might accept either locking pensions to CPI or, more generously, locking them to average wages. But what we must not do is lock them to both whichever is the higher. It is perfectly possible for inflation to exceed wages one year and wages to catch up the next; and that repeatedly. With a double-lock, pensions could rise twice as fast as wages. 

    So, it has to be that we go for a single-lock, to average wages. The author of the cited paper [1], Heidi Karjalainen, points out that average wages tend to rise in jerks, and advocates using a "‘smoothed earnings link’, similar to the approach used in Australia."

    It is plain silly for a succession of governments from 2011 to the present Labour government to promise to retain the triple lock. It suggests that there are too few MPs in the House able to understand the simple train of thought outlined above.

References

[1]  Karjalainen, H. (2025). "What are the effects of the ‘triple lock’ and how could it be reformed?" Institute for Fiscal Studies. Available at: https://ifs.org.uk/articles/what-are-effects-triple-lock-and-how-could-it-be-reformed 

[2]  https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/averageweeklyearningsingreatbritain/october2025