Prime Minister Andy Burnham announced Tuesday a significant shift in pension policy, proposing to scrap the triple lock mechanism by 2030 to fund social care reforms. The triple lock, implemented in 2011, ensures the state pension increases annually based on the highest of inflation, average earnings, or a 2.5 percent floor. Under the new proposal, the direct link with average earnings would be severed, meaning pensions would rise by the lower of inflation or 2.5 percent.
Government sources estimate this change could save taxpayers £15 billion per year by 2040, equating to approximately £1,136 per pensioner annually. However, these savings alone are not expected to fully cover the projected costs of the social care reforms, with estimates suggesting a need for up to £18.5 billion per year. This indicates that tax increases will also be necessary to finance the initiative.
The new National Care Service, as outlined, will cover personal care costs but will not extend to the full residential costs of care homes. This means individuals may still need to sell their homes to finance their long-term care.
Burnham described the decision as part of a 'new settlement' to establish an NHS-style National Care Service. However, the proposal has already drawn sharp criticism from various political figures and unions.
Sharon Graham, leader of the Unite union, called the plan 'electoral suicide,' arguing that targeting pensioners, many of whom receive modest incomes, to fund care is morally wrong and that alternative funding sources should be explored. Former shadow chancellor John McDonnell warned that the policy could jeopardize the next election and disproportionately affect millions of pensioners living in poverty.
Robert Jenrick, Reform UK's Treasury spokesman, labeled the plan 'just mean,' questioning why pensioners are consistently asked to make sacrifices and contrasting this with a lack of proposed cuts to other areas like benefits or foreign aid.
Dennis Reed of the campaign group Silver Voices predicted that Burnham has "walked into a political minefield" and will be "dogged by this all the way to the next election." He characterized the move as a "winter fuel payment on stilts" and disputed the claim that scrapping the triple lock would generate sufficient funds for the social care reforms.
Conversely, government sources maintained that a separate mechanism would be in place to ensure pensions do not fall below 30 percent of average earnings over time. They also stated that while the full savings would materialize in later decades, the initial years of the 2030s would see only a few hundred million pounds generated.
Conservative Party leader Kemi Badenoch criticized the plan, asserting it "won't generate enough savings to fund a nationalised care system for another two decades, which means more tax rises are inevitable."
Economists and policy analysts have also raised concerns about the financial viability of the plan. Rachel Vahey of AJ Bell stated that the idea of the triple lock repeal solely financing social care is "fantasy" and that the numbers "simply don't stack up" until cumulative savings significantly increase.
The Institute for Fiscal Studies acknowledged the abolition of the triple lock as a "substantial step towards a more sustainable state pension system" but echoed concerns that it would not yield enough to fund the proposed care system.