Relative poverty after housing costs could almost halve by 2049-50 even as the earnings-link of the triple lock will be adjusted from 2030, the Department for Work and Pensions has said. Industry representatives warn a close eye needs to be kept on pensioner living standards.  

New analysis by the DWP estimates the impact on pensioner poverty of Prime Minister Andy Burnham's announcement on Tuesday that the triple lock will be reformed. The department expects that after housing costs, relative poverty – defined as less than 60% of median income – among state pensioners will reduce from 14% in 2024-25 to 8% by 2049-50.

The estimate comes ahead of a Pensions Commission report looking at pensions adequacy, expected in spring 2027, and a review of the state pension age. Earlier this year, the Pensions Commission said that 15m people are undersaving for retirement and 45% of working-age adults, about 18m, are not saving into a pension at all, despite nearly half of them being in work. 

However, taxpayer support becomes considerably more generous once a person reaches state pension age. The full new state pension is about £1,046 a month, while Pension Credit offers about £1,031. In comparison, Universal Credit provides about £425 a month to people of working age. This cliff-edge makes the state pension age a high stakes decision for society and individuals alike. Poverty rates more than doubled among 65-year-olds when the state pension age was put up to 66 in 2020.  

Burnham has linked his politically high-risk triple lock change to funding the long-standing issue of social care in England, promising a service free at the point of use with "no care charges paid out of your basic state pension".  

In nominal terms, the projected savings from the triple lock adjustment run to £15bn a year by 2039-40 and to £50bn by 2049-50, or translated to real terms savings, £11bn and £30bn, respectively. However, the IFS has said the saving is very uncertain because of how unpredictable the old triple lock is, claiming the saving "could reasonably be anywhere between £4bn and £20bn".

Whether this can pay for a National Care Service depends also on what will be included in this. It is currently unclear if hotel charges in nursing homes will continue to be means-tested as is the case in Scotland. The average cost of a week of residential or nursing care in England was £1,185.55 in 2024-25, while an hour of externally provided home care cost £23.56; both went up by 7% in a single year. 

The government has also offered some more clarity on how the new earnings link will work, suggesting the state pension will never fall below its level as a share of average earnings when the triple lock is adjusted. 

In 2025, the Work and Pensions Committee recommended that the pensions adequacy review should consult on objectives for the state pension, among others. A target expressed as a share of average earnings has also been called for by the Institute for Fiscal Studies. 

A government spokesperson said: “We are committed to the triple lock for the rest of this parliament, and the adjusted triple lock will build on the gains the policy has made for pensioners in raising the state pension. This means the state pension will always increase by at least the highest of 2.5%, CPI inflation or a new earnings link – so that the state pension will never fall below its record high level when we adjust the current triple lock.”

 

 

Industry has been cautiously supportive but says the government will need to ensure pensioners' living standards do not fall behind. 

 

The Investment and Saving Alliance said the state pension has an important role in preventing pensioner poverty but must be sustainable for future generations, and supports the PM's intention to address social care.    

"An adjusted triple lock would continue to protect pensioners from increases in the cost of living while helping to maintain a fair relationship between State Pension increases and earnings growth among the working-age population. This would provide a more stable and predictable framework for long-term public expenditure whilst supporting intergenerational fairness," said Renny Biggins, head of policy products and long-term savings.    

Others have likened the change to the triple lock to a double-edged sword.   

“A clear plan to fund social care is long overdue, but if the net impact for those relying on the state pension is negative, this will be a zero sum game," warned Mark Futcher, head of DC pensions at Howden Employee Benefits.  

He argued that any change to the state pension must be accompanied by measures to improve pension adequacy, via the Pensions Commission.    

The government will need to keep a close eye on pensioner living standards, particularly for those most reliant on the state pension, said Patrick Thomson, head of research analysis and policy at Standard Life Centre for the Future of Retirement.  

“This comes at a critical time for Gen X, with many approaching retirement facing pension undersaving challenges, compounded by declining access to defined benefit pensions. The move to a double lock needs to be considered alongside decisions on the future state pension age and wider action to improve retirement adequacy, including increasing automatic enrolment contributions,” Thomson added.

The announcement reinforces the importance of helping members understand how changes to the state pension could affect their retirement plans, believes Iain McLellan, director at consulting firm Isio.  

"Schemes should consider how any reform could affect members’ projected retirement income and ensure their communications and planning tools clearly explain the relationship between state and workplace pensions," he advised. "For some members, a less generous State Pension over the longer term could mean needing to save more privately to achieve the retirement income they are targeting.”