State pension triple lock could be reformed with ‘simple’ change to make increase fairer | Personal Finance | Finance

An investment expert has put forward a “simple reform” that could make the triple lock system fairer.

The question of the long-term viability of the triple lock has been raised after large increases in recent years, including a record 10.1 percent hike last year and an 8.5 percent increase last month.

Mike Deverell, Investment Manager at Equilibrium Financial Planning, told Express.co.uk: “The triple lock will probably need reforming sooner rather than later but the main parties are reluctant to do anything because it is a vote winner.

“It will only become more costly as the population ages and the proportion of pensioners to workers increases.

‌”A simple reform option would be to move to CPI (price inflation) only, perhaps with a cap – for example, pensions to rise in line with inflation up to a maximum of five percent.

‌”That would remove issues such as during the pandemic when pensions went up 2.5 percent even though inflation was near zero and wages were falling. That felt a little unfair to the younger generation.”

He also predicted how much the state pension could increase next year in line with the triple lock.

He explained: “CPI inflation has dropped to 2.3 percent. It may creep back up a bit later this year but most forecasters, including the Bank of England, expect it to remain below 3 percent for the remainder of 2024.

‌”Meanwhile, on the latest reading, wage growth was at around 5.7 percent. It has come down a bit from around 8% last year, but seems likely to remain above price inflation for a while yet.”

‌”Therefore, it does like very possible that pensions will rise in line with wage inflation next year, rather than price inflation. In other words, pensioners will get an above inflation increase, perhaps as much as five percent.”

With the recent increase, the full new state pension is now £221.20 a week while the full basic state pension is £169.50 a week.

You can find how much state pension you are on track to receive using the Government’s state pension forecast tool.

Another question for the future of the state pension are suggestions that National Insurance could be scrapped.

Work and Pensions Secretary, Mel Stride was asked by a Government committee this week (May 22) if scrapping the tax would result in a £5 or £6 a week reduction in the state pension, which would amount to £260 or £312 a year.

But Mr Stride told the Work and Pensions Committee that although the Government had “aspirations” to scrap the tax, what this would mean for the state’s finances were “hypothetical questions” for now.

For the latest personal finance news, follow us on Twitter at @ExpressMoney_.