The State Pension triple lock is the name given to the UK Government’s guarantee to raise State Pension payments every year. With the cost of essential bills and goods getting more expensive, one of the benefits of the current State Pension system is that the triple lock ensures payments will go up every year. If State Pension payments did not rise every year, they would risk losing real term value due to inflation. The triple lock is designed to ensure that payments will increase by at least the rate of inflation every year, as well as keep up with wage growth. In this article we explain how the triple lock works, how it has been adapted in the recent past and what the future holds for the way State Pension increases are calculated.
How does the State Pension triple lock work?
The triple lock is the UK Government's method of guaranteeing that State Pension payments will rise at the start of each tax year. The idea is simple: the state pension will increase by the highest of three measures – 2.5%, average wage growth or the CPI (Consumer Price Index) rate of inflation. This means that if inflation is low and wage growth is stagnant, pension payments will still rise. It also means that if the rate of inflation shoots up or wages grow rapidly, state pension payments can keep up.
However, the ‘lock’ part of the triple lock is not completely watertight. The government is able to change the methodology of the system, or even scrap it altogether if it becomes too expensive or there is the political will to change the system. For example, the triple lock was suspended for the increase due in 2022, with only two of the three measures applied. This was blamed on an unusually large rise in average earnings following the end of furlough payments under the Coronavirus Job Retention Scheme.
The CPI figure used is the year-to-date rate from the most recent September, while wage growth figures are recorded in July. This means that both are arguably out of date by the time State Pension payments are increased the following April.
The New State Pension and the Basic State Pension are covered by the triple lock, so both increase at the same rate. You can find out more about the State pension, including the difference between the New State Pension and the Basic State Pension in our article ‘How much is the UK State Pension?’.
Why was the State Pension triple lock suspended for 2022?
The government is able to change the details of the triple lock, or even get rid of it entirely. In 2021, the Treasury was reportedly concerned that figures on earnings growth in the three months up to July – one of the pillars of the triple lock – were distorted by the withdrawal of furlough payments provided as part of the Coronavirus Job Retention Scheme. Average earnings had fallen drastically under various government restrictions, with the furlough scheme introduced to partially pay salaries. When restrictions were lifted and the scheme was shut down, average earnings grew quickly. As a result, sticking with the triple lock would have required an 8.8% rise in State Pension payments.
The government judged this to be too great an increase, so opted to suspend the triple lock and adopt a double lock. The new double lock used the higher of the CPI rate or 2.5%, which for 2022 was the CPI rate of 3.1%. Therefore, State Pension payments increased by 3.1% rather than the 8.8% required under the triple lock.
What is the State Pension triple lock 2023?
The Treasury decide that the State Pension triple lock guarantee could return for the April 2023 State Pension increase. This means that State Pension payments rose by 10.1%, the CPI rate for September 2022 and the highest of the three pillars of the guarantee. Therefore the return of the average wage increase measurement has not had an effect this time around. The change took place in line with the start of the 2023-24 tax year.
While many pensioners were relieved to see the triple lock return, the future of the guarantee is less certain.
The future of the State Pension triple lock guarantee
Payments to pensioners form 60% of the UK’s welfare expenditure, so it should be no surprise that the system used to calculate annual State Pension rises can be controversial. Some have criticised the continued use of the triple lock, especially as the 2023 rise was almost double the previous greatest increase under the system. Pension payments increasing with inflation can be difficult to politically justify when wages are falling in real terms and other areas of government spending are being cut.
However, attempts to change the triple lock have proved politically toxic in the past, including an aborted revision of the system in 2017. Following through with the triple lock in 2022 would have cost a reported £4-5 billion, so similar moves to suspend different pillars of the triple lock in an effort to avoid a sharp increase – without the negative publicity of a full repeal – could be the future.
How the triple lock has affected the State Pension
Before it was suspended in 2022, the triple lock had led to State Pension payments being higher than if any single metric was used. The table below shows what Basic State Pension increases would look like – in years the triple lock was used – if any one of the individual measurements were applied instead of always selecting the highest.
|Tax year||Actual full value of Basic
State Pension (per week)
|Alternative scenarios (per week)|
|Average earnings increase||2.5%|
|Difference vs triple lock in 2021/22||-£13.40||-£12.85||-£6.84|
Figures from the “State Pension triple lock” briefing paper, House of Commons Library
Over the period of time these figures cover, the additional cost to the Treasury of the triple lock is a reported £5.6 billion more than using a double lock based on an average earning increase and 2.5%, as used to calculate the 2022 rise. Therefore, it has had a significant impact on maintaining retirement incomes for millions of pensioners across the UK.
The table shows that the effect of the triple lock is most notable over a significant period of time, which also means that the consequences of removing it would take a long time to notice. Any income not rising with inflation means that it will lose real value over time. Over one year that may not be too noticeable or worrying, but over a ten year period it becomes much more stark.
It is important to remember that the State Pension only forms part of most retirement incomes, so you should also focus on other ways of making sure you have enough money when you stop working.
Other ways to protect retirement income
The State Pension is unlikely to be enough to function as your sole income in retirement, even if payments continue to increase through the triple lock. You will need to save money for your retirement in other ways to function as your base income, topped up by the payments you will get through the State Pension.
A pension is the best way to save for your retirement. With a personal pension, you can choose how much to pay in and how often to do it. The money is then invested into different funds, which should help your pot grow into a suitable nest egg for your retirement.
Your personal pension keeps your retirement savings in a pot that you cannot spend until you are at least 55 and helps you access tax relief on the money you save. The tax relief boils down to the government topping up every £100 you pay in with an additional £20, for a basic-rate taxpayer.
We explain more in our article 'How to build a low cost DIY pension'
This is a retirement savings scheme put in place by your employer. A workplace pension offers the double benefit of creating a fund for your retirement and earning you extra money through employer contributions. The set-up is usually that the more you pay in, the more they pay in, up to a capped percentage of your salary. So paying into your pension can earn you more money from your employer. There will also be a tax refund from the government added in.
Your payments will come directly from your salary and you will be automatically enrolled if you are eligible, unless you choose to opt out. The funds are for your retirement, so you won’t be able to access them until you are at least 55. You can have both a workplace pension and a personal pension.
An ISA is a tax-free savings account that you can put a limited amount of money into every tax year. The 2023-24 tax year limit is £20,000. There are lots of different categories of ISA, including Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs and Lifetime ISAs (LISAs).
A LISA is designed to help you save for your first home or for retirement. If you are between the age of 18 and 40, a LISA can be a useful way of boosting your retirement savings. You will only be able to access your savings for free once you are 60, though you will not be able to pay in any more money once you hit 50. The government will top up every amount you deposit with an annual 25% bonus, capped at £1,000 each tax year. This means you would need to save £4,000 in a year to get the full £1,000 government bonus. However, it is important to remember that you will not benefit from the tax relief of a pension.
We explain ISAs in a little more depth in our article 'The different types of ISA explained'