Pensions UK has proposed replacing the triple lock with a more sustainable uprating mechanism once the state pension reaches a “clear adequacy benchmark”, ensuring it provides minimum income standards for a decent retirement.

In its response to the government’s third state pension age (SPA) review, the trade body acknowledged the triple lock’s role in protecting pensioners’ incomes in real terms - particularly given ongoing concerns about the adequacy of retirement outcomes from defined contribution (DC) schemes.

However, Pensions UK pointed to Office for Budget Responsibility projections, which suggest that if the triple lock is maintained, state pension spending could rise from around 5 per cent of GDP today to approximately 7.7 per cent by the early 2070s.

It cautioned that this “significant” increase could pose long-term sustainability challenges, particularly given demographic shifts and economic uncertainties.

“Given the political sensitivity of the triple lock, political parties have been reluctant to make changes to the system as it currently stands,” the association said.

“While the government has committed to maintaining the triple lock for the duration of this parliament, we believe it is prudent to consider how the policy could be adjusted to ensure long-term sustainability.”

Pensions UK proposed that a revived Pensions Commission should examine whether the triple lock remains viable over the long term and explore alternative approaches to uprating.

The group said its suggested approach of replacing the triple lock with an uprating mechanism would balance the need for adequate pension income with fiscal responsibility, ensuring the long-term sustainability of the state pension system.

The recommendation marks a shift from Pensions UK’s 2016 stance, when it supported linking state pension increases to earnings to maintain its value at around 30 per cent of median earnings.

More recently, the group backed the triple lock increase in 2022 and described it as a “crucial safeguard” against rising retirement living costs in its 2024 Retirement Living Standards report.

Concerns about the triple lock’s sustainability have grown since the release of September’s inflation figures last week, which confirmed that pensioners are in line for a 4.8 per cent rise under the triple lock in 2026.

Alongside the uprating debate, Pensions UK also raised issues around the SPA, highlighting that any increase to the SPA should be contingent on a corresponding rise in healthy life expectancy, to ensure fairness across the population.

It warned that there are persistent disparities in region, occupation, and income group both in life expectancy and healthy life expectancy and raising the SPA without consideration for these risks could risk deepening inequalities, particularly for those in manual jobs, deprived areas, and minority groups.

This adds to recent industry calls for the government to take a holistic approach, as other industry experts also expressed that life expectancy is "not the only factor” to consider when setting the SPA.

Given its previously highlighted concerns, Pensions UK called for at least 10 years' notice before any changes to the SPA are implemented to allow savers ample time to prepare, building on calls for a minimum 12-year lead time from TISA and Aegon.

Pensions UK also cautioned against introducing multiple pension ages and an automatic adjustment mechanism, arguing that a single SPA helps maintain clarity for savers.

However, it said the government should remain open to limited flexibility for early retirement in certain circumstances.

Additionally, the association urged ministers to take a “balanced, evidence-based approach” to both SPA and uprating reforms, underpinned by transparency and public engagement.
 
And finally, in undertaking the third SPA review and the continued work of the Pensions Commission, it proposed that the government should examine international best practice and assess a wider spectrum of policy interventions, particularly those aimed at enhancing workforce participation.

The government’s third review of the SPA was announced in July earlier this year, alongside the relaunch of the Pensions Commission and is required as part of the government’s obligations under the Pensions Act 2014, which requires the government to review state pension age every six years.

The review is focused on the factors it should consider relating to SPA and the proportion of adult life currently spent in retirement.

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