The UK State Pension, adjusted each year through the Triple Lock system, plays a crucial role in supporting millions of pensioners across the country. However, the system’s increasing cost has raised concerns about its long-term affordability. The Triple Lock mechanism, which ensures pension increases based on earnings growth, inflation, or a fixed 2.5%, has resulted in significant financial commitments from the government.
As the number of pensioners rises and living costs continue to climb, the State Pension is becoming an ever-larger part of government spending. Financial experts are now discussing potential reforms to address these challenges.
The Rising Costs of the State Pension: A £145.6 Billion Bill
The cost of providing the State Pension is on an upward trajectory, with the UK government expected to spend a staggering £145.6 billion in the 2025/26 financial year. This substantial expenditure highlights the fiscal strain caused by the increasing number of pensioners and the growing payments required under the Triple Lock system. As the cost of living rises, the government’s financial commitment to pensioners continues to expand.
Currently, pensioners receive different amounts based on which pension they qualify for:
- The New State Pension: £230.25 per week (equivalent to £921 every four weeks).
- The Basic State Pension: £176.45 per week (equivalent to £705.80 every four weeks).
The rising cost of these pensions has prompted ongoing debates about their long-term affordability. If the Triple Lock continues to raise pensions by higher-than-expected percentages, the burden on the government’s finances will only grow.
Triple Lock: How Increases Could Affect Pensioners
Under the Triple Lock, the State Pension is annually adjusted by the highest of three measures: the growth in average earnings, the Consumer Price Index (CPI) inflation, or 2.5%. For the year 2025, wage growth was recorded at 4.8%, while inflation stood at 3.8%. This means that, assuming wage growth continues as the leading measure, the New State Pension could increase to £241.30 per week, which would total £965.20 every four weeks. The annual amount for those on the full New State Pension would rise to £12,547.
For those on the Basic State Pension, the increase would be £184.90 per week (up from £176.45), which equates to £739.60 every four weeks, bringing the total annual amount to £9,614. These increases, though beneficial for pensioners, add significant pressure to government spending.
Additionally, if the lower Triple Lock measure of 2.5% were applied, it would push the New State Pension to exceed the income tax threshold by nearly £79 in the 2027/28 financial year, as the total pension would exceed £12,570, the current threshold for tax-free income.
Freeze or Raise the State Pension Age? Potential Solutions
The increasing cost of the State Pension has led to calls for reforms. One possible solution is freezing the State Pension, which would prevent further inflation-driven increases. However, as financial expert Claire Trott pointed out, this would likely be a politically unpopular decision. Pensioners rely on these increases to cope with rising living costs, and freezing the pension could cause significant unrest among this demographic.
Instead, Trott suggests increasing access to Pension Credit, a means-tested benefit that is often underclaimed.
Pension Credit is the most under-claimed means-tested benefit in the UK – Trott explains, highlighting the gap between eligibility and uptake.
Many pensioners who qualify for Pension Credit do not take advantage of it, meaning that the government could redirect support to those most in need without a blanket increase in State Pension payments. This approach could help ensure that support reaches the most vulnerable without placing additional strain on the budget.
Another option is raising the State Pension age. As of now, the State Pension age is set to increase from 66 to 67 years starting in 2026, with a full transition expected by 2028. Further increases to 68 years are planned between 2044 and 2046. Raising the pension age has been a controversial issue, but it is considered one of the more viable solutions. As people live longer and healthier lives, many are able and willing to continue working past the traditional retirement age.
The Political Sensitivity of Pension Reforms
Despite the clear financial pressures, reforming the State Pension remains politically sensitive. Pensioners are a significant voting demographic, and many of them still live in poverty despite receiving the State Pension. Politicians are often hesitant to make changes that could alienate such a crucial group of voters. However, the long-term affordability of the pension system is becoming an increasingly urgent issue.
As Trott emphasized in an interview with Daily Record,
The long-term affordability of the Triple Lock has been questioned for some time and understandably so. With people living longer and the Triple Lock delivering higher increases more frequently than originally anticipated, the cost has exceeded expectations and is only set to rise further.
Trott also pointed out that if reform were to be considered, any proposals would need to ensure that pensioners on the lowest incomes are adequately supported.
Means-testing is often raised as a solution, but in practice, it’s unlikely to be pursued, given the cost and complexity of implementation outweighs the savings.
Additionally, Trott added,
There are other options such as freezing the State Pension and increasing access to Pension Credit which might be a more pragmatic route – it’s already in place and better targeted to those who need help most. Raising the State Pension age has been controversial in the past, but it’s arguably the most viable and publicly palatable option in the longer term, as people continue to live and work for longer.
