Andy Burnham, who appears poised to become the next prime minister, is expected to introduce changes to the UK pension system, based on briefings from his advisers and policy discussions underway. Although the full details of his cabinet and key economic appointments, including chancellor, remain uncertain, early indications suggest adjustments to both the state pension and private pension frameworks.
One likely area of reform concerns the state pension’s "triple lock" guarantee, which currently ensures annual increases in payments based on the highest of inflation, wage growth, or 2.5 percent. The policy has faced criticism from economic advisers close to Burnham, including Lord O’Neill of Gatley, who described the triple lock as “bonkers,” and Richard Hughes, former head of the Office for Budget Responsibility (2020-25), who labelled it unsustainable in the long term. A growing consensus is forming around the need for a more sustainable approach, with proposals such as those from the centre-right think tank Onward advocating for pension increases linked to earnings growth but adjusted to reflect demographic shifts—specifically, reducing payments when fewer workers contribute national insurance to fund the pensions.
Burnham has committed to upholding the triple lock throughout the current parliamentary term, in line with Labour’s 2024 manifesto promise. However, with the government’s Pensions Commission expected to deliver its final review in 2027, changes following the next general election remain plausible.
On the private pensions side, Burnham’s advisers, including former Bank of England economist Andy Haldane, have focused on encouraging greater investment of pension funds into the UK economy. Haldane has proposed making the tax relief afforded on pension contributions conditional on pension schemes increasing their allocations to UK growth assets, such as private companies and infrastructure projects. Advocates argue this could support start-ups and innovation, areas where the UK excels but sometimes struggles to sustain.
Critics of this approach warn it could be complex to implement, costly to administer, and difficult to regulate effectively. Some experts suggest alternative measures, such as abolishing stamp duty on UK share purchases by pension schemes, which currently acts as a tax penalty on domestic investment. Another proposal involves reversing a 1997 policy change under Gordon Brown that reduced corporation tax relief on dividends paid by UK companies to pension funds—a move estimated to cost pension schemes around £5 billion annually. These targeted tax adjustments may offer a more straightforward way to encourage pension investments in the UK economy.
Overall, while Burnham's premiership promises some pension-related reform, concerns persist that broader fiscal policies may continue to rely on increased public spending and higher taxation, potentially limiting positive impacts on retirement savings. Analysts and industry observers await further details to assess how these policy directions will influence the nation’s pension landscape.