The International Monetary Fund (IMF) has joined the chorus of voices pointing to the "important savings" the UK government could achieve by scrapping the triple lock on the state pension.
In its latest annual assessment of the UK economy, published yesterday (18 September), the IMF stated savings achieved by scrapping the triple lock could help fund the NHS.
The fund said in many advanced economies population ageing was likely to put considerable pressure on the budget over the longer term.
It quoted figures from the Office for Budget Responsibility (OBR), which estimates public spending on health care and pension benefits would increase by a cumulative 4 percentage points of GDP between 2023 and 2043.
It said: "Opportunities for further efficiency gains in the NHS should be explored, and the elimination of the ‘triple lock’ could lead to important savings over time on pensions."
Under the current triple lock system, the state pension increases each year in line with whichever is the highest: consumer price inflation (CPI), average earnings growth, or 2.5 per cent.
This year, the state pension has gone up in line with consumer price inflation, which hit 3 per cent in September.
In its manifesto for last year’s snap election, the Conservative party proposed scrapping the 2.5 per cent lower limit after 2020.
But following the election results, the government was forced to abandon this idea in order to secure parliamentary support from Northern Ireland’s DUP, in a move that disappointed the pensions industry.
David Robbins, senior consultant at Willis Towers Watson, said the IMF’s argument for increased savings depended on what the triple lock was being replaced with.
He said: "The OBR estimates that spending on state pensions and some pensioner benefits would be a full 1 per cent of GDP lower in 50 years’ time if the triple lock were abandoned in favour of a straightforward earnings link.
"However, less than a third of that saving would be realised under the double lock proposed in the 2017 Conservative manifesto, whereby the new state pension and basic state pension would rise by the higher of prices and earnings every year, without a 2.5 per cent underpin."
Mr Robbins said one difficulty of moving away from the triple lock was that the projected short-term savings could be zero.
He said: "It’s when things don’t turn out as expected that the triple lock costs more than the earnings link that is currently the minimum statutory increase.
"So manifesto writers will wonder why they should alienate pensioners if it doesn’t even help pay for their other promises."
The Pensions Policy Institute (PPI) warned in March some 700,000 more pensioners would be living in poverty by 2050 if the triple lock were to be replaced and pension increases were only linked to average earnings.
Malcolm McLean, senior consultant at Barnett Waddingham, said the triple lock had been intended to be a temporary measure and should be replaced from the start of the next parliament, in 2022.