If the triple lock on the state pension continues for the next 30 years it could cost the government 0.5 per cent of the UK’s gross domestic product, Sir John Cridland has warned.

Speaking at the PLSA Annual Conference in Liverpool today, Sir John Cridland, who is heading up the independent state pension age review, said the predicted cost of the state pension to the government by 2045 is expected to be 7.1 per cent of GDP.

Currently, the state pension costs 5.5 per cent of GDP, but it is expected to increase to 7.1 per cent as the ratio of workers to pensioners changes; it will increase to 357 for every 1,000 by 2045 from 305 for every 1,000 currently.

“If the triple lock continues over the next 30 years, then of that 7.1 per cent of GDP, 0.5 per cent will be directly a consequence of the triple lock’s impact of indexing the state pension’s value higher than either earnings or inflation,” Cridland said.

Last week Cridland published his interim report into the state pension age and he made it clear to delegates that he is at the halfway point; he is clear what the evidence is, he is clear what the questions are but he hasn’t decided what the answers are.

“The exam question I thought I was being asked to answer has become a rather different one, surely for the state pension to be affordable, if we have the blessing of living longer then we need to work longer, a fairly logical consequence, but actually I have concluded that isn’t the right exam question. There is a triangulation here, which is rather more complex. You can’t look at when the state pension age needs to be set without also looking at what your policy is on the value of the state pension.”

Therefore he said he needs to look at whether we prioritise access to the state pension against value of the state pension. He said the public have a choice, if they want to have early access to the pension, for example at 67, the government can’t, at the same time, sustain the value of the state pension higher than that of earnings.

“If you believe that continuing to rebuild the value of the state pension is the priority then to achieve affordability you might have to bite the bullet on the state pension age going higher more quickly.”

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