Labour minister addresses fears over means-testing state pension
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Labour’s pensions minister has conclusively addressed fears that the state pension could be means-tested and triple-lock scrapped after the opposition floated the idea.
The government is not looking at either of these measures, Torsten Bell confirmed on Tuesday at the Pensions and Lifetime Savings Association (PLSA) conference in Edinburgh.
Dismissing the idea of means-testing the state pension directly, he told reporters: “No, only Kemi Badenoch thinks that’s a good idea.”
The new MP for Swansea West, who was appointed pensions minister in January, added that the triple-lock measure is also safe under Labour. This is the guarantee, first implemented in 2011, that ensures the state pension increases year-on-year by the highest of three measures: inflation, the average wage increase, or 2.5 per cent.
It has been criticised in the past for enabling bumper pay rises for pensioners at the expense of other economic concerns. Conservative leader Kemi Badenoch raised idea in January, telling LBC it could be necessary to ensure the economy is “growing.”
Speaking to host Iain Dale, Ms Badenoch said: “Means-testing is something which we don’t do properly here.”
“Starting with the triple-lock is not how to solve the problem. We need to start with: why are we not making the same kind of money we used to make?
In 2023, the state pension increased by 10.1 per cent, in line with September’s record inflation figure. This marked the UK’s highest-ever state pension increase. This year it will rise to 4.1 per cent, up £472 a year and in line with average wage growth in 2024.
Analysis by the Office for Budget Responsibility (OBR) has found the state pension system costs UK taxpayers £125bn a year. This is set to rise as the country’s population continues to live longer while ministers maintain their commitment to the triple lock.
Means testing the state pension was another idea put forward by the leader of the opposition. Exactly what form this could take is unclear, but in principle it would mean wealthier pensioners – potentially those with more in private pots or savings – would be entitled to less money from the state pension.
Countries like Australia and Canada both have means-tested pensions, where the amount paid in retirement can change relative to a pensioner’s income.
In Canada, the pension is paid universally and at a flat-rate, but this can be topped up with benefits that are related to earnings. In Australia, the ‘age pension’ for citizens is reduced if their income from other sources goes over set thresholds.
Comments from the pensions minister now confirm that neither of these models are under consideration by the current government, but economists continue to recommend the triple lock be looked at.
The respected Institute for Fiscal Studies (IFS) recently wrote the measure presents concerning “unpredictability” for public spending, pointing out that it could “easily” cost between £5 billion and £40 billion extra per year by 2050.
