How the State Pension triple lock works

How the State Pension triple lock works

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Lately, the “triple lock” system has come under doubt as the UK government grapples with the rising cost of the State Pension. Indeed, there is a growing recognition that the triple lock is not sustainable for much longer and may be due for reform in the coming years. Yet how does the triple lock work? How can it feature in a retirement plan and how might it change in the future? Below, our financial planners at Cedar House offer some reflections. We hope this is helpful to you. If you want to discuss your own financial plan with us, please contact our team for more information or to access personalised financial advice:

020 8366 4400 or


How the triple lock works

The State Pension provides a guaranteed lifetime income to a recipient (once they claim it after reaching their State Pension age; i.e. 66 in 2022). The “triple lock” system is used to determine how much the income should rise at the start of each tax year, in April. In theory, the highest of three measures is used to decide the increase:

  • Average UK earnings;
  • Prices (as determined by the Consumer Price Index);
  • 2.5%.

This helps to ensure that State Pension income does not lose value in real terms as the cost of living goes up. For instance, if average UK earnings are 5% in a given tax year but inflation is at 2.5%, then most people’s State Pension should rise by the former. 


Why is the triple lock under threat?

The fact that the State Pension rises by at least 2.5% each year means that it is a rising cost to the government, which needs to fund it largely via taxes and/or public borrowing. In 2020-21, for instance, the State Pension cost the government £101.2bn; up from £98.8bn in the previous tax year. To put this into perspective, the UK spent £928bn in 2020, with the State Pension forming the second highest single expense, after health and social care.

In recent years, however, the triple lock has become even more costly due to COVID-19 and the rising rate of inflation. In 2020, the UK went into lockdown and workers were furloughed, leading to a sharp decline in economic activity. When the economy re-opened, however, this distorted the average UK wage growth figures – meaning that the triple lock could have risen by 8% in April 2022. The government deemed this too costly and so suspended the triple lock. Presently, in November 2022, Consumer Price Index (CPI) inflation is now running high at 10.1% and so the government faces another difficult choice about what to do in April 2023 (when the triple lock system could lead to a 10% rise in the State Pension).  


Pension planning and the triple lock

Given the uncertainty about the future of the triple lock, it is understandable that some people are concerned about how their retirement income may be affected by a potential change. At the outset, it is important to recognise that a complete abolition of the State Pension is extremely unlikely. Over 100 nations offer a state pension in some form and it would be politically unwise for the UK to reduce its own significantly (given the huge political risks and capital involved in doing so). Rather, a more likely scenario is that the triple lock system is reformed in the future to make it less costly to the public purse.

It is important to recognise that the UK population is ageing, which means that fewer taxpayers (as a percentage of the population) need to support a growing number of retired people getting State Pension payments. One option would be to maintain the “double lock” system which is, in effect, currently replacing the triple lock. At the moment, the State Pension is set to rise at either 2.5% or with CPI inflation (whichever is higher). However, this system remains vulnerable to high inflation and so may also not be sustainable. Another possibility – albeit unlikely – is that the State Pension is changed to just rise by the Bank of England’s inflation target each year (2%), or perhaps slightly above it. This would mean, however, that someone’s State Pension would lose significant “real value” during years of high inflation. 

Of course, none of us has a crystal ball on these matters. We can only make informed guesses about what is likely to happen. What is fairly certain is that the State Pension will continue, in some form, for many years. It is still a valuable retirement planning tool, since it offers a lifetime (guaranteed) income in retirement and means you are not solely reliant on your workplace and/or personal pensions to support your lifestyle. The future of the triple lock is less certain, but might change in the coming years. If so, this may lead to a fall in real-terms State Pension income. To prepare for this possibility, we suggest speaking with a financial planner to ensure that you are building a strong, diversified portfolio which can help you achieve your future goals.



Interested in discussing your financial plan with an experienced financial adviser? Get in touch today to discuss your financial plan with a member of our team here at Cedar House via a free, no-commitment consultation:

020 8366 4400 or


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