OECD tells UK to scrap triple lock pensions for fiscal space
The OECD has urged the incoming UK government to abandon the expensive triple-lock pension guarantee to free up fiscal space as debt and spending pressures mount.
The Organisation for Economic Co-operation and Development has called on the UK to abandon its triple-lock pension guarantee, arguing the policy exposes public finances to severe supply shocks. In a 140-page economic survey, the Paris-based institution advised replacing the mechanism—which increases the state pension by the highest of wage growth, inflation or 2.5%—with an average of earnings and inflation.
Scrapping the pledge could yield long-term savings worth 2% of GDP. The OECD warned the current system “puts upward pressure on public expenditure and adds significant fiscal risks”. This aligns with previous warnings from the Office for Budget Responsibility, which noted the policy has already cost three times as much as anticipated, as well as thinktanks like the Resolution Foundation and the Institute for Fiscal Studies.
The recommendations arrive as Prime Minister Andy Burnham prepares to take office next week alongside a new chancellor. The incoming fiscal team will inherit an economy where “modest growth, high public debt, high interest payments and increasing spending pressures from ageing, climate and defence are limiting fiscal space,” according to the OECD.
The assessment offers a mixed legacy for outgoing Chancellor Rachel Reeves. The OECD endorsed her pro-growth agenda as a “strong basis for a gradual recovery” but stressed that her recent spending review plans “leave limited room for manoeuvre”.
Beyond pensions, the report identifies the NHS as a target for efficiency gains, noting UK hospital spending is high by international standards. It recommends improving patient discharge coordination to ease capacity constraints. On taxation, the OECD explicitly cautioned against raising headline rates, warning the current burden is already high and the system is “complex and distortionary”.
Reeves pushed back against the notion of underlying weakness following her final Mansion House speech. “The OECD agrees that we have restored stability, putting the economy in a much stronger position than it was two years ago,” she said.
