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OECD urges Labour to drop UK triple-lock pensions promise
The OECD warns the triple lock adds “significant fiscal risks” and says the UK faces limited fiscal space due to high public debt, high interest payments, and rising spending pressures.
The OECD urged Labour to abandon the UK state pension triple-lock, arguing the rule that boosts pensions each year to whichever is highest of wage growth, inflation or 2.5% puts pressure on public finances. In a special pensions policy chapter in its latest assessment of the UK economy, the Paris-based organization said the pledge “puts upward pressure on public expenditure” and adds significant fiscal risks by exposing budgets to supply shocks, requiring timely reform, while noting any change would need public support built first.
The OECD said Rachel Reeves, preparing to leave the Treasury after two years as chancellor, delivered broadly positive results, including a pro-growth agenda that provides a basis for a gradual recovery. Still, the report emphasized that repairing the public finances will remain a priority, citing modest growth, high public debt, high interest payments, and increasing spending pressures linked to ageing, climate and defence.
The OECD noted that the UK plans pencilled in at last year’s spending review leave limited room for manoeuvre. It also referenced calls from other UK thinktanks, including the Resolution Foundation and the Institute for Fiscal Studies, to reform the triple lock, and it said the Office for Budget Responsibility has highlighted the policy as a risk to long-term fiscal sustainability, adding that it has cost three times as much as anticipated when introduced.
As an alternative, the OECD suggested replacing the single highest-of formula with an annual increase based on an average of earnings and inflation. It estimated that approach could generate long-term savings worth 2% of GDP, and the report also pointed to other cost saving measures, though details were cut off in the provided text.