Speaking at Labour's conference in Liverpool on Tuesday, Andy Burnham said he will pare back the triple lock and direct the savings toward a national care service.
From 2030 onward, the state pension would go up each year by whichever is greater: inflation or 2.5%. According to a UK official, there would be a top-up in years when earnings growth is stronger to keep pensions at about 30% of median full-time pay. This would supplant the post-2011 rule that uprates pensions by whichever is greatest of inflation, wage growth, or 2.5%. The long-standing policy has reduced pensioner poverty, but many economists say it is becoming hard to sustain given other demands on the public finances.
Burnham also reiterated his destination for social care. On Sunday he said he wanted care to be provided without charges when accessed, as with the NHS. For decades, successive governments have attempted - without success - to reform the UK's fragmented social care system, including proposals Burnham advanced as health secretary in 2009 that stalled over cost.
The Health Foundation estimates making social care free at the point of use would cost £18.5 billion, or $24.5 billion.
A UK official said the revised pension lock is expected to save about £15 billion annually by 2040. The Institute for Fiscal Studies backed the direction on Tuesday, writing that "the new triple lock will prevent the state pension being locked into an ever-increasing level of generosity compared with workers' earnings, thereby generating significant savings in the long run," describing it as a "welcome change." In its illustrative scenario, it sets inflation at 2% and assumes nominal average earnings rise by 4% each year, apart from years 4 to 6 when earnings growth is 1%.
Planning for retirement and care starts with steady choices that protect your savings. Join Briefs Finance CEO Jaspreet Singh on September 29th for a FREE live investor workshop, How to Profit From A Dollar That's Losing its Value, where he shows how we're spotting investment opportunities as the dollar falls. Save your spot.
The IFS also estimates the triple lock has added £16 billion to the annual pensions bill since 2011 compared with linking only to wage growth, and says keeping it could push the annual bill up by as much as £40 billion by 2050.
Opponents pounced quickly. Conservative leader Kemi Badenoch argued the plan would not raise enough to pay for a national social care service and would mean tax rises. Reform Party leader Nigel Farage accused Burnham of "launching an offensive against our elderly" rather than tackling the UK's "bloated benefits bill," adding, "If he is so desperate to pick a fight with pensioners, he should get on with it, call a general election now, and let the public decide." Liberal Democrat leader Ed Davey said social care "can't be funded from the pockets of our poorest pensioners," while Greens leader Zack Polanski said the government should tax the rich. Inside Labour, former shadow chancellor John McDonnell called the plan a "gift to Reform," adding, "There are so many alternatives to funding social care without cutting pensions," and, "It's a pity this was included as it has spoiled a good speech."
For your household budget, the takeaway is simple: the government wants pension increases to track prices or a floor of 2.5%, with occasional earnings top-ups, and funnel the savings into care. If it happens, the pensions bill would grow more slowly while more funding gets steered to services many families currently shoulder on their own.
A thoughtful approach to income and benefits helps your money weather life's shifts. Our CEO Jaspreet Singh is hosting a FREE live investor workshop, How to Profit From A Dollar That's Losing its Value, on September 29th. Sign up free to join him live.
