As the UK's largest long-term savings and retirement business, we’re perfectly positioned to explain what’s needed for a properly funded retirement, including what the UK government’s pension ‘triple lock’ means for you.

The mechanism was introduced in 2010 as part of the UK government’s commitment to provide an adequate retirement income by ensuring that the state pension keeps pace with the cost of living. It aims to achieve this by guaranteeing that it will annually increase by whichever is highest: 2.5%, the rate of inflation, or the growth of average earnings. We can therefore rely on a minimum yearly increase in our pension income, even if living costs rise faster than average earnings.

Linking increases to inflation and earnings growth helps pensions keep pace with rises in the cost of living, providing long-term support for retired people. However, the triple lock has been a subject of controversy in recent years, with concerns about its sustainability and impact on public finances.

The pressure of earnings growth caused by the COVID-19 pandemic added to these concerns and resulted in the temporary suspension of the triple lock. While the mechanism has been praised for providing pensioners with stability and security, it is very expensive to run, and will increase in cost with the ageing population, which is why it is potentially unsustainable in the long term.

Keeping pace with the cost of living

At Phoenix Group, we believe in securing financial wellbeing during later life. We acknowledge the pressures around the triple lock's sustainability, and also its role as an essential feature of the UK’s retirement system by providing an important mechanism that ensures the state pension level is still suitable as the cost of living rises.

The triple lock mechanism will continue to be a topic of debate, especially as the UK’s ageing population pushes up the state pension bill. Future governments will be under constant pressure to find more sustainable ways to fund retirement income.

There is also other support for people of all ages across the UK. We remain committed to providing our customers with affordable and reliable solutions, helping them plan for a secure retirement. This is especially important during times of economic uncertainty.

If you’d like to learn more about the workings of the triple lock, and how state pension might develop in the future, click below to read the latest deep dive from our longevity think tank, Phoenix Insights.