Ministers need to review the state pension and the triple lock policy as the costs to the Government are set to surge over the coming years as more people retire. The state pension recently had its biggest-ever increase, as the triple lock was reinstated, with payments increasing 10.1 percent.
Some 12.6 million people claimed the state pension in 2022/23, with this figure set to increase to 13.1 million by 2027/2028.
The triple lock policy guarantees payments increase each year in line with the highest of 2.5 percent, the rate of inflation or the rise in average earnings.
With the recent 10.1 percent uprating, the full basic state pension now pays £156.20 a week while the new state pension is £203.85 a week.
Looking at the latest figures from the DWP, Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, warned there may be “eye-watering increases” in the years to come.
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She explained: “Around 12.6 million people are claiming the state pension with this number expected to surge past 13 million in just five years, all thanks to the fact we are living longer.
“This is great news but undoubtedly puts real pressure on the smaller working population who shoulder the cost.
“We recently saw the government decide to postpone an increase in state pension age to 68 on the basis of increases in longevity slowing down.
“This is fair, given the very real prospect that many people simply are not able to keep working until their late 60s, but the headache remains of how to contain these burgeoning costs.
“We will likely see the decision revisited after the election and so could see further changes to state pension age, but the role of the triple lock is also likely to come under the spotlight.”
The state pension age is currently 66 for both men and women. Legislation is in place for this to gradually increase to 67 between 2026 and 2028.
It will then go up again in stages to 68 between 2044 and 2046. An independent review was recently published into the state pension age, with some predicting the move to 68 would be brought forward.
However, ministers have postponed any changes to the state pension age, with a decision to be made after the next General Election.
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Ms Morrissey said the state pension needs to be reviewed, commenting: “Brought in over a decade ago to make sure pensioners received decent state pension increases, the triple lock has also been criticised in recent years for being intergenerationally unfair.
“The time has come for a review of the state pension and the triple lock’s role within it to make sure it remains fit for purpose.”
The new Government figures also show there has been an increase in claimants of Pension Credit, which is thought to be hugely underclaimed, with tens of thousands of people missing out on the income boost.
Ministers have tried to raise awareness of the benefit, which can increase a household’s income by more than £3,500 a year.
Ms Morrissey said: “The Government has tried to boost awareness of Pension Credit in recent months and the figures show a small boost in estimated take up from 1.368m people in 2022/2023 to 1.38m the following year.
“This may look small but balanced against the fact we expect to see the number of Pension Credit claimants drop over time as more people retire on the full new state pension then the uptick could be bigger than first thought.
“However, it’s likely we still have a long way to go before everyone who qualifies for this important benefit gets it.”
The benefit tops up a person’s weekly income to £201.05 a week for single claimants and up to £306.85 a week for couples.
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