Expert Proposes Overhaul of State Pension System Amid Concerns

State pension payments in the UK may face significant changes as experts raise concerns about the sustainability of the current triple lock system. Claire Trott, head of advice at St. James’s Place, has suggested that freezing state pension payments could be a viable solution, alongside improving access to Pension Credit, which is currently the most under-claimed means-tested benefit administered by the Department for Work and Pensions (DWP).

Trott expressed doubts about the long-term viability of the triple lock, which guarantees that the state pension increases annually by the rate of inflation, average wage growth, or 2.5%, whichever is highest. According to the Office for Budget Responsibility (OBR), this system is projected to cost £15.5 billion annually by 2030, a substantial increase from previous estimates. This financial burden poses a significant challenge to public finances.

Potential Changes to Pension Age and Means Testing

The state pension age is already set to increase from 66 to 67 starting next year, with the transition expected to be completed for all individuals across the UK by 2028. Currently, legislation mandates a further increase in the state pension age from 67 to 68, scheduled for implementation between 2044 and 2046. For instance, individuals born on April 6, 1960 will reach the state pension age of 66 on May 6, 2026, while those born on March 5, 1961 will reach the age of 67 on February 5, 2028.

Trott highlighted that means-testing is often proposed as a solution to the sustainability issue, but noted that the costs and complexities associated with its implementation could outweigh potential savings. Instead, she advocated for freezing the state pension and increasing access to Pension Credit, arguing that it is already in place and better directed toward those in need.

Public Perception of Pension Reforms

While raising the state pension age has historically sparked controversy, Trott described it as arguably the most feasible and publicly acceptable option in the long term. As lifespans increase and more individuals remain in the workforce, adjustments to the pension system may become necessary to maintain its integrity.

As discussions continue regarding the future of the state pension, the emphasis on sustainable solutions remains paramount. Ensuring that the pension system can support future generations while balancing public finances will be a significant challenge for policymakers in the coming years.