Triple lock future under threat – the numbers that show why

Britain is facing a pensions time-bomb as the number of people reaching pension age rises far faster than the working population – piling pressure on the future of the state pension triple lock and increasing the prospect of higher taxes. The latest Office for National Statistics (ONS) figures show the working-age population increasing by about 2.2 million, or 5 per cent, between 2024 and 2049. Over the same period, the number of people of pensionable age is projected to increase by 2.9 million, or almost 24 per cent. Shorts The Government Actuary’s Department highlighted the changing ratio in a bulletin published last week. For every 1,000 people of working age, there are currently 280 people of pensionable age. But by 2049, that figure is projected to rise to 329, while the number of people aged 85 and over is expected to roughly double, from 1.8 million in mid-2024 to 3.6 million, adding to pressure on health and social care. The demographic shift also points to a growing reliance on migrant labour to sustain the workforce as Britain ages. Separate ONS projections show deaths outnumbering births by 2.5 million over the next 25 years, while net migration of 5.6 million is expected to provide the only source of overall population growth. Pressure on the triple lock The figures will put even more pressure on the long-term future of the state pension triple lock, which guarantees that the state pension rises each year by whichever is highest: inflation, average earnings or 2.5 per cent. This has seen large increases in the state pension over the last few years, due to high inflation and wage growth. But with the cost of the state pension standing at £146.1bn – almost half the entire £333.7bn welfare budget – the cost of the triple lock is increasingly being seen as unsustainable in the long term. Reforming it, however, will be difficult as older people are the most likely to vote. Labour has pledged to keep it for the length of this Parliament, despite the Office for Budget Responsibility saying last year it would cost £15.5bn annually by then – and will add £43bn to state pension spending by 2070. Lord Jim O’Neill, the former Goldman Sachs chief economist and an adviser to Burnham, has called for what he described as “genuine welfare reform”. He specifically said he would include the state pension triple lock in that reform, arguing for a “more sensible approach to welfare spending”. David Gauke, vice-chair of Prosper UK, a cross-party organisation campaigning for economic growth, investment and productivity, and former Tory chief secretary to the Treasury, told The i Paper: “Given the forthcoming demographic changes and the urgent need to reassure the financial markets of our fiscal credibility, our political parties need to face up to the reality that the triple lock is unsustainable.” However, Burnham told The i Paper in an exclusive interview in June that he would leave the triple lock untouched, insisting Labour must honour its manifesto promise to millions of pensioners at a moment of collapsing public trust. Prospect of tax rises The figures come as the Government faces immediate choices over how to pay for its spending commitments. Andy Burnham refused to rule out tax rises on Monday, acknowledging the country faced a “challenging” financial outlook. The Prime Minister said he would not be “unrealistic” about the state of the public finances, while reiterating Labour’s manifesto commitment not to increase the main rates of income tax, VAT or employee national insurance. He said the Government would take a cautious approach to the economy and avoid measures that risked damaging jobs, household finances or interest rates. However, many of his closest advisors have backed changes to capital gains tax (CGT), which is levied on gains made when an asset – like equity in a company or a second home – is sold. It has previously been backed by Burnham’s second-in-command, First Secretary of State Louise Haigh and Defence Secretary Wes Streeting. Streeting has called equalising CGT with the income tax rates of 20, 40 and 45 per cent a “wealth tax that works”. Lord O’Neil has said, however, he is against wealth taxes, including increasing capital gains, arguing the Government needs to encourage “genuine risk-taking and more entrepreneurs”.