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Chancellor could tweak the triple lock without breaking trust with retirees


New analysis from Quilter shows that Chancellor Rishi Sunak could temporarily tweak the state pension triple lock while maintaining a link to wage growth to avoid the large one-off increase expected under the current system.

The triple lock ensures that state pension incomes are guaranteed to be uprated each year by wage growth, inflation or 2.5%; whichever is higher [1].

As a result of Covid-19 and the government’s furlough scheme, wages are expected to fall by 3.3 per cent this year, but then bounce back next year creating a one-off spike in wage growth, increasing by 5 per cent [2]. 

Left unchecked, the triple lock will increase the old-style state pension by £532.20 a year by 2022/23 and the new style state pension by £694.67 a year [3] at a time when many will be out of work and inflation will remain low.

However, Quilter’s analysis shows that for a temporary fix, the Chancellor could maintain the triple lock, but use a five-year rolling average for wage growth rather than using the year-on-year figure.

Under this methodology, the old-style state pension will only increase by £374.88 a year in 2022/23 and the new style pension by £489.23. This is equivalent to the government saving approximately £2.2bn by 2022/23.


Full basic state pensioners weekly income:






Triple Lock




Five-year wage average





New ‘flat-rate’ state pensioners weekly income:






Triple Lock




Five-year wage average





This methodology would provide a short-term solution to the abnormal wage volatility issue next year while maintaining a link to long-term wage growth. It will provide the government with an opportunity to carefully consider whether a long-term solution is required to recalibrate state pension incomes if the triple lock is to be removed.

This includes a proposal from the Institute for Fiscal Studies and the Work and Pensions Select Committee, who suggested [4] replacing the triple lock with a ‘smoothed earnings link’ to provide a link to long-term wages while offering protection in periods of high inflation. Under this methodology, the state pension is set as a fixed proportion of wages. When wage growth lags behind inflation, the state pension will increase in line with prices until real earnings recover and the state pension would then revert to its benchmark proportion of average earnings.

It is one of a range of options for uprating the state pension sustainably over time. However, it is dependent upon determining a fair level at which to set state pension incomes as proportion of earnings. The Australian system upon which the IFS proposal is based is currently benchmarked at 41.76 per cent of male total average weekly earnings and the single person rate is 27.7 per cent of average male earnings.

Jon Greer, head of retirement policy at Quilter comments:

“The triple lock has worked well in reversing the relative decline in the state pension so that it has made up much of the ground it had lost relative to earnings during the 1980s and 1990s.

“However, once the furlough scheme ends later this year and wages recover to their normal levels, the current triple lock will provide a considerable boost to the level of state pension at a time when many are out of work and the government struggles to control the deficit. This is untenable both in terms of its fiscal sustainability and intergenerational fairness.

“Despite a pledge to maintain the triple lock in his government’s election manifesto, this quirk in the system could mean the triple lock is high on the Chancellor’s list of fiscal changes when he sets out the government’s post-Covid recovery plans in the coming weeks.

“The government could temporarily amend the triple lock by uprating the state pension based on the higher of 2.5 per cent, inflation or five year rolling average wage growth. This will smooth any abnormal wage effects whilst protecting real incomes and saving the government a considerable amount each year.

“Maintaining the triple lock in its current form is simply not an option. The government should use this opportunity to carefully consider the merits of moving to a long-term solution, such as a smoothed earnings link, so that pensioners share in the proceeds of economic growth, whilst protecting their income against inflation and ensuring intergenerational fairness”. 


[1] The relevant earnings benchmark for the triple-lock uprating of the state pension for the 2021/22 financial year is the year-on-year change in the average weekly earnings index for the three months to July 2020. This figure is scheduled to be published on 15 September 2020. The ONS treat furlough payments as a subsidy to companies when calculating earnings data.

[2] Figures based on the Bank of England Monetary Policy Committee’s May 2020 report figures for average weekly earnings, which treat the furlough scheme as a subsidy to companies rather than a transfer to households (as is assumed by the OBR in their reference scenario). The MPC’s projections have been amended to reflect the fact that the government base state pension uprating on data between May and July rather than the whole calendar year (as is the case in the MPC report). The fall/rise in earnings is likely to be exaggerated in this period given the immediate impact of COVID-19.

[3] Assuming the triple lock increases the state pension by 2.5 per cent in 2021/22 and 5 per cent in 2022/23.

[4] Work and Pensions Committee, Intergenerational Fairness, 2016

For more information contact

James Ventress020 7002 402507884

Notes to Editors:

About Quilter plc:

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £95.3 billion in customer investments (as at 31 March 2020).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions; and discretionary fund management.

The business is comprised of two segments: Advice and Wealth Management and Wealth Platforms.

Advice and Wealth Management encompasses the financial advice business, Quilter Financial Planning; the discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.

Wealth Platforms includes Old Mutual Wealth UK platform and Quilter International, including AAM Advisory in Singapore.

The Old Mutual Wealth Heritage life assurance business was acquired by ReAssure Group Plc on 2 January 2020.

Since its IPO in June 2018, Quilter plc’s businesses have progressively rebranded to Quilter, as follows: 

  • Quilter Financial Planning (previously Intrinsic)
  • Quilter Private Client Advisers (previously Old Mutual Wealth Private Client Advisers)
  • Quilter Financial Advisers (previously Charles Derby Group)
  • Quilter Financial Adviser School
  • Quilter Cheviot
  • Quilter Investors
  • Old Mutual Wealth (becoming Quilter Investment Platform)
  • Quilter International (previously Old Mutual International)

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