Does Brexit signal the end of state pension Triple Lock?

The Triple Lock ensures that state pensions rise by the greater of CPI, earnings growth or 2.5%

During the Referendum campaign David Cameron warned that a Leave vote could mean the end of the Triple Lock, as the economy would take a down-turn and that public spending might not be able to sustain the expense of this policy.

The State Pension costs around £90 billion a year, and Hargreaves Lansdown believes that if the Chancellor does now carry out his threat of a post-Referendum Budget, "the Triple Lock could be an early casualty".

According to analysis conducted in 2011, the cumulative cost of the Triple Lock, relative to the old RPI link, between 2011 and 2026 would be £45 billion.

Speaking to the Telegraph earlier this month, Cameron said: "We did all this in the expectation of a growing economy. But if we had a big black hole, we could struggle to justify this special protection any longer. In fact, even if we could justify it morally, it wouldn’t actually be affordable.

"So here is the reality: if we leave, the pensioner benefits would be under threat, and the Triple Lock could no longer be guaranteed in the long term."

Pension tax relief costs the exchequer billions every year and there may now be increased pressure to balance the Budget;

Additionally, Hargreaves Lansdown has raised concerns that pension tax relief could be another casualty of the Referendum, and has warned that "investors would be well-advised to make the most of the available tax relief while they still can".

The pension provider added that the "key question for final salary scheme members, sponsors and trustees is once the music stops, how will their assets and liabilities have moved?"

UK schemes are currently invested around 33% in shares (of which around a quarter are UK shares), 48% in Gilts and Fixed Interest, with the balance held in ‘other investments’ such as cash, property and hedge funds.

Hargreaves Lansdown believes that on the liability side of the equation, any increase in bond yields would be a good thing (though it would be offset to some extent by falling values on the asset side of the balance sheet). A 0.1% rise in Gilt yields would reduce deficits by £23.3 billion.

However if the economy does start to contract, "then corporate profits will be hit and this in turn could lead to further funding issues for employers".

Steve Webb, Director of Policy at Royal London, said: "For today’s pensioners there may be concerns about threats to the ‘triple lock’ on the state pension, but it would be odd for a government to prioritise a cut which would affect the most powerful voting bloc in the country.

“Ultimately, pensions are a long-term project and their future depends on a healthy and growing economy. This, rather than the immediate future, will be the key test which will determine the quality of life in retirement of millions of UK citizens.”