Jeremy Hunt under pressure to scrap state pension triple lock

Jeremy Hunt, the Chancellor of the Exchequer, is facing calls to overhaul the state pension triple lock in order to improve public finances, according to forecasts.

Warnings from the OECD

The Organisation for Economic Co-operation and Development (OECD) has warned that the UK will avoid a recession next year. However, the country is expected to have the second-slowest growing economy in the G7 by 2024.

The Paris-based body has suggested that reforming the triple lock could provide the government with more flexibility, particularly when dealing with high energy prices and the war in Ukraine.

Background on the triple lock

In 2010, the Coalition government introduced rules stating that pensions would rise by average earnings, inflation, or 2.5%. However, in his recent Autumn Statement, the Chancellor announced an 8.5% increase in pensions.

The Institute for Fiscal Studies has estimated that the triple lock increases state pension spending by £11 billion per year.

OECD recommendations

The OECD has recommended that the triple lock be reformed by indexing pensions to an average of CPI and wage inflation. They also suggest providing direct transfers to poor pensioners in order to mitigate poverty risks.

UK economic growth and interest rates

The OECD forecasts that UK growth will rise from 0.5% this year to 0.7% in 2024 and 1.2% in 2025. They have also predicted that the Bank of England will not lower interest rates until 2025, and that inflation will remain above the 2% target for the entirety of next year.