Experts have warned uncertainty still lies ahead for future retirees. Plans are already in place to increase the state pension age to 68 between 2044 and 2046 for those born on or after April 1977.
Increasing the state pension age is a seemingly straightforward way for the Treasury to save tens of billions of pounds. It will push down the cost of the state pension, as well as generate more revenue in income tax from people who have no choice but to stay in the workforce for longer.
However, history suggests that increasing the state pension age deepens social inequality across the country. When the state pension increased from 65 to 66, one in seven 65-year-olds were pushed into income poverty as a result, the IFS estimated.
In the most deprived 20pc of areas in England, there was an 11 percentage point increase in the number of over-65s returning to work. That was more than double the wealthiest 20pc of areas, which recorded a rise of just four percentage points.
It could take both an increase in the state pension age and reform of the triple lock policy to balance the impact on both public spending and social welfare.
So what would a new state pension policy look like?
A “double lock” or “smoothing average” of the triple lock are frequently discussed alternatives.
Baroness Ros Altmann, a former pensions minister, said: “It is clear that the 2.5pc part of the triple lock has become redundant, but in the long-term fiscal accounts this part adds significantly to the forecast cost of state pensions in the future. It has no economic logic to it and was put in as a political decision.
“The triple lock has become a totemic symbol of government commitment to pensioners, but since the new state pension began, it seems to make much less sense from a social perspective.”
Baroness Altmann has suggested a “double lock” policy might be more suitable.
“A double lock on all parts of the state pension, paying the best of earnings or price inflation might be fairer and making tax free benefits such as the Winter Fuel Payment taxable could help reduce the costs,” she said.
An alternative “smoothing” process could improve the policy’s sustainability, so that the state pension increases by the average of inflation, wage growth and 2.5pc, rather than the highest of the three.
If the policy had been implemented in this shape since its introduction in 2011, it would have saved the Government approximately £13.4bn, according to calculations from the pensions specialist Canada Life.
