OBR forecasts suggest that the triple lock will cost households around £10bn extra a year by 2034. It means annual spending on the state pension will soar past £150bn in real terms within a decade.
The current full state pension is £221.20 per week after rising by 8.5pc in April. At 30pc of average earnings, the new state pension is currently at a higher level than the basic state pension was at any point since at least 1968, thanks largely to the triple lock.
The policy will ensure the 4.3 million pensioners who receive the full state pension see a real weekly uplift of around £50 a week by 2034, which is around £11.30 per week higher than if the state pension rose in line with average wage growth – as was the case previously.
The IFS has urged the Government to scrap the triple lock and tie future state pension increases to earnings, a move that would save taxpayers billions of pounds, it said.
A wave of retiring Baby Boomers – born between 1946 and 1964 – is expected to push up the pensions bill dramatically this decade, while further depleting Britain’s dwindling workforce.
It means the question of how to save the state pension – for years dismissed as tomorrow’s problem by politicians – is coming into sharp focus.
Of all the unpalatable options available to policymakers, ditching the triple lock may be the most pragmatic.
Baroness Altmann said: “The 2.5pc [element of the triple lock] makes no sense whatsoever. It’s a number plucked out of thin air, if wages and prices are falling or keeping steady, why should the state pension go up?
“Promising 2.5pc when inflation falls below the bank’s inflation target of 2pc makes no sense, and it adds to long-term cost.”