Key Takeaways
- More significant changes to pensions from Andy Burnham’s government are expected at the Autumn Budget.
- The new prime minister has committed to the state pension triple lock, but a review of the state pension is already underway.
- The Pension Commission’s interim report has already said 15 million people are not saving enough.
Pensions savers will be anxiously waiting for the Autumn Budget on Oct. 28, Andy Burnham’s first as prime minister and John Healey’s first as chancellor. While the pensions triple lock is expected to stay, the focus is on a possible raid on pension wealth to fund Burnham’s ambitious program of social care spending.
Ahead of every budget, speculation grows about likely changes to pensions policy that will have an impact on those working towards retirement. The 2024 Autumn Budget saw significant changes made by Rachel Reeves to the way pensions are taxed.
This time will be no different. Questions are already being asked about the government’s ability to fund all of Burnham’s promises, such as reforming social care, maintaining the Labour Party’s manifesto commitment of not increasing taxes, while shielding consumers from the worst of the cost-of-living crisis.
“Before the last general election [in 2024], the Institute for Fiscal Studies criticized what we called a conspiracy of silence around the difficult fiscal choices facing whichever party entered government. Honest discussion of trade-offs should be the starting point for good government,” says IFS director Helen Miller.
Will the State Pension Age Rise Under Andy Burnham?
Away from the recent drama in Westminster, a second Pension Commission has been quietly going about its business. While the commission will publish its final report in spring 2027, most industry experts expect it to conclude that people need to work longer, with those over 50 rejoining the workforce to fund a decent retirement.
Most agree the state pension age will have to rise. The question is how quickly. “Working longer—and in particular reducing labor market inactivity among people in their fifties—is a necessary part of achieving adequate incomes in retirement,” the Pension Commission’s interim report, published in May, acknowledges. This will not be a popular decision, especially as—according to the Office for National Statistics—healthy” life expectancy is dropping and AI is threatening to disrupt the already difficult job market for older workers.
As research from Pensions UK recently showed, the state pension will be the difference between many people achieving a “minimum” standard of retirement living and poverty.
The commission’s interim report has already said 15 million people are not saving enough, with those on low incomes and in self-employment particularly vulnerable to a low “replacement rate”—the amount of money needed in retirement to replace a paid income.
What Is the State Pension Triple Lock?
- The triple lock is a spending commitment made by the UK government more than 15 years ago.
- It ensures that state pension payments rise every April by the higher of Consumer Prices Index inflation, wage growth, or a minimum of 2.5%.
- Under the triple lock, the weekly state pension has increased from just over £100 per week for a single person in 2011 to £241 per week in April 2026.
Pressure Builds on the Triple Lock
Many policy experts will have been frustrated to see Andy Burnham pledge to keep the state pension triple lock, which is facing increasing criticism.
The Pension Commission stopped short of making early recommendations on the triple lock, which increases state pension payments by the higher of wages, inflation, or a minimum of 2.5%. Plenty of others have a view, however. The Office for Budget Responsibility, the official fiscal watchdog, says the triple lock could put the government’s finances on an “unsustainable path” and cost £15 billion a year by the end of the decade.
The Resolution Foundation, a think tank once led by the current pensions minister Torsten Bell, has called for the policy to be scrapped. Having rid the cabinet of plenty of Starmer acolytes, it was notable that Bell kept his role, which spans both Department for Work and Pensions and the Treasury.
“As well as being unfair, it is also not fiscally sustainable for the state pension to rise forever by more than the earnings of a typical worker,” the Resolution Foundation says of the triple lock.
The Tony Blair Institute, a think tank run by the former prime minister, says the triple lock is an “unaffordable” policy. Rachel Reeves’ predecessor in the Treasury as chancellor, Jeremy Hunt, describes the triple lock as “unaffordable and immoral” as well as a “drag on economic growth.”
In the 2025/26 tax year, the government spent £146.1 billion on the state pension. Earnings and inflation—not the 2.5% baseline—have triggered the majority of state pension triple lock increases in the last 15 years, as the following table shows:
According to investment platform AJ Bell, over two-thirds of “baby boomers” want to see the triple lock stay. Just 14% of Generation Z and 22% of millennials agree. At some point the government of the day will have to address this disparity in opinion.
Will Andy Burnham Target Pension Tax Relief?
Andy Burnham has said he will stick to his party’s 2024 manifesto commitment not to raise the headline rates of income tax, VAT, or national insurance. But possible changes to pension tax relief—alongside reductions in the pension tax-free lump sum—may offer him a means of targeting wealth, and raising revenue, without deploying headline wealth taxes. These ideas run alongside changes to property taxation and will make individuals with large pension pots and/or large houses particularly anxious in the runup to the budget.
Wholesale pensions tax relief reform has been dodged by different chancellors over a number of years, but even fear of such changes is impacting investor behavior. According to AJ Bell analysis of Financial Conduct Authority data, savers withdrew as much as £10 billion from their pensions in the 2024/25 tax year for no other reason than fear of a clampdown on the rules. Will they do so again?
“Having already reiterated the 2024 manifesto tax pledges, [Burnham’s] room for maneuver is limited,” the Institute for Government’s Jill Rutter says.
At the moment, savers receive tax relief on their pension contributions in accordance with their marginal rate of tax, a policy that costs the government more than £50 billion each year. Moving to a lower, “flat rate,” has long been vaunted as a way of saving money, simplifying the system and making pensions more beneficial to those on lower incomes—at the expense of higher earners. But there’s a problem: Nobody agrees on whether it’s a fair policy.
In their interim report, the Pension Commission’s authors framed pension tax relief as “regressive,” as basic rate taxpayers, who represent the majority of taxpayers, don’t receive as much tax relief as those on the higher—and additional—rate of tax.
Paul Johnson, a former IFS director and respected critic of government spending plans, in a recent article, argued the opposite. It’s “not so outrageous” that higher and additional rate income tax payers get tax relief because they pay nearly three quarters of all income tax.
