Pensions Triple Lock
With permission, I will make a statement on the Government’s plan for the future uprating of the state pension. Security and dignity in later life is a mission that has run through every Labour Government. Harold Wilson was the first to introduce the statutory link with earnings. The creation of pension credit in the early 2000s increased the incomes of the poorest pensioners and saw pensioner poverty halve under the last Labour Government. In our 2024 manifesto, we said we would keep the triple lock for the duration of this Parliament—that is a promise that we will keep to pensioners. Keeping that promise means that this year the full new state pension is rising by £575. It is set to be over £2,000 a year more by the end of this Parliament compared with when we took office in 2024. That will take the new state pension to over 30% of average earnings by the end of the Parliament and it is forecast to be a record high. In the future, we will adjust the triple lock to make those gains permanent but also to put the state pension on a sustainable basis. Let me set out how that will work and deliver a state pension that rises each and every year. The uprating mechanism will retain its current three elements. There will be a universal state pension that protects against inflation, ensures a material rise every year, and enables pensioners to share in the wealth of the nation as wages go up. From April 2030, the state pension will continue to go up by the highest of inflation, 2.5% or what is required to maintain its record high level against average earnings. That will lock in for the future all the gains from the triple lock up until April 2030. The adjusted mechanism will mean that the state pension grows in line with earnings over time, instead of outpacing them as is the case with the current triple lock. It will end what is known as the ratchet effect, which makes the triple lock consume a greater share of national wealth over time, making reform at some stage inevitable. In simple terms, it will mean the state pension will continue to rise but not to permanently grow as a share of average earnings. We know that people want security in retirement and we are committed to protecting the poorest pensioners. Under our plans, pensioner poverty is set to fall. In addition, we have asked the Pensions Commission to include suggestions on further supporting lower-income pensioners in its final report, to be delivered next year. A good retirement, however, is about more than income. It is about security and peace of mind too, which is why it is so important that the savings from the change will make a significant contribution to a new settlement for older people: a rising, more sustainable state pension alongside free personal care through a new national care service. This is a policy that is better for pensioners, better for families and better for the NHS. It is better for pensioners because so many worry about what will happen to them in their final years; better for families because those worries are shared by children and grandchildren who want to know that their elderly relatives will be looked after when they need it; and better for the NHS because it will ease the pressure we see today, where failings in our social care system mean many pensioners are kept in hospital longer than they need to be because social care beds are unavailable. The cost of inaction—the cost of turning away from this—is more pressure on the NHS, more ambulance call-outs, more A&E admissions, more corridor care and more people stuck in hospital when they do not have to be. That is why change is needed. The triple lock has of course been the subject of much debate. Economists and commentators have proposed a range of options—as has the Conservative party, over the years—from removing the earnings link to scrapping the triple lock altogether. Some have called for the state pension to be means-tested. We have rejected those proposals. We believe that our plan is the right answer to a difficult question that has been ignored for far too long. I am enormously grateful to my hon. Friend the Minister for Pensions for his work in this area, which has helped to ensure that we can have a system going forward that is sustainable and retains, in an adjusted way, the three current elements of the triple lock system. It will mean that the state pension will not continue to outpace average earnings as it would have done under the current triple lock. The savings from the changes will reduce spending by an estimated £15 billion a year by the end of the next decade, rising substantially to around £50 billion a year by 2050. The pension and social care changes are a new settlement that puts the universal state pension on a more sustainable footing, so that it is there for decades to come, while giving pensioners and older people a better deal on social care. Pensioners can be confident that they will have a rising state pension every year. They can also be confident that we are sorting out one of the most difficult problems the country has faced for a long time—the issue of social care. A new settlement for pensioners, a rising pension, a sustainable system, and a plan to fix our social care system: that is what we will deliver. I commend this statement to the House.