The British government is being urged to abandon its pensions “triple lock” or face growing pressure on the public purse.
The Organisation for Economic Co-operation and Development (OECD) said in a report published on Wednesday that the practice of indexing annual pension increases to the maximum of earnings growth, interest rates or 2.5% would put growing pressure on the UK at a time when public debt is already above £2tn ($2.6tn).
“Population ageing is putting pressure on public finances,” the OECD wrote in its United Kingdom Economic Survey 2020. “Indexing state pensions to average earnings rather than using the ‘triple lock’ (the maximum of earning growth, inflation and 2.5%) would improve sustainability.”
The Conservative Party introduced the pensions triple lock in 2010 and the policy has been a cornerstone of its pitch to older voters ever since. The policy was expensive prior to the COVID-19 crisis but experts warn costs could spiral as the result of the pandemic.