The latest figures from the Office for National Statistics (ONS) show a 5% unemployment rate for the three months to September 2025, alongside a sharp fall of 117,000 in the number of payrolled employees compared to the same period last year. This decline is raising alarm over shrinking tax revenues at a time when government spending is under growing strain.
State Pension Commitments Face Scrutiny amid Fiscal Pressure
The triple lock has been instrumental in securing real-terms gains for pensioners, most notably a 10.1% rise in April 2023 during the inflationary peak. But the mechanism’s generosity has long drawn criticism over its long-term affordability. Now, with falling employment reducing income tax and National Insurance receipts, the Treasury may be forced to reconsider its priorities.
According to Mark Richdon, tax director at accountancy firm Bishop Fleming, “higher unemployment would reduce National Insurance and income tax receipts, tightening the Treasury’s fiscal position just as pension and benefit costs continue to rise.” He noted that the government may look to widen its tax base, including targeting landlords and pensioners, to make up for the shortfall.
While Labour has reaffirmed its commitment to the triple lock for the remainder of this Parliament, the upcoming Autumn Budget on 26 November is widely expected to clarify the government’s stance. This annual event typically sets the pension uplift for the following April.
The pressure on public finances is further compounded by a growing number of claimants seeking state support. As the job market shows signs of weakness, ministers may find themselves caught between two difficult options: preserving pensioners’ incomes or supporting the newly unemployed.
Benefit Demand Rises as Job Losses Mount
The impact of rising unemployment is already evident across the welfare system. According to Sebrina McCullough, director of external relations at Money Wellness, more people are now seeking debt advice and financial assistance. “For many households, even a short period without regular income can push them into hardship, especially with savings depleted after years of high living costs,” she explained.
She warned of a potential “ripple effect” if the trend continues, as lower tax income and higher benefit expenditure place further pressure on public services. This dynamic could make it harder to protect pension commitments in the longer term.
In response to labour shortages in certain sectors, some employers are finding success in re-engaging those out of work. Home care provider Cera has recruited over 3,900 carers and nurses in the past year, including many who were previously unemployed or inactive. The firm uses artificial intelligence in its recruitment process to accelerate hiring and match candidates more efficiently.
Dr Ben Maruthappu, CEO of Cera, described how their AI tool Ami significantly reduces the time between application and interview, saying it “transforms this challenging process” in the care sector. While not a silver bullet, such innovations may play a role in reducing unemployment and easing pressure on state finances over time.
The Chancellor’s upcoming budget will need to balance competing demands: rising pension costs, growing benefit claims, and sluggish tax income. With the triple lock back under the microscope, the next few weeks may prove pivotal for both current and future retirees.
