The UK Government should consider reforming the “costly” pensions triple lock to free up more money and boost growth, a group of top economists has said.

The Organisation for Economic Co-operation and Development (OECD) said it is an urgent task for the UK to address its tax and spending policies.

The globally recognised organisation, incorporating 38 member countries, included the recommendations as part of its global economic outlook.

It forecast Britain to have the second-slowest growth of the world’s G7 advanced economies this year and next.

Under the triple lock, the state pension rises each year in line with inflation, wage growth, or 2.5% – whichever is higher.

Pensioners will get an 8.5% state pension increase from next April, after Chancellor Jeremy Hunt used his autumn statement last week to seal his commitment to the triple lock.

The OECD said the Government should consider modifying the policy as borrowing costs remain high.

It said: “Maintaining and strengthening current fiscal efforts is essential against the challenging backdrop of high borrowing and debt, and as higher debt interest payments have eroded fiscal headroom.

“Reforming the costly triple lock uprating of state pensions would help, by indexing pensions to an average of CPI (Consumer Prices Index) and wage inflation, and by providing direct transfers to poor pensioners to mitigate poverty risks.”

An ageing population and high inflation coupled with the triple lock will push up pension spending by about 0.8% of gross domestic product (GDP) by the 2027 to 2028 tax year, it said.

“Fiscal pressure on households and businesses has increased significantly since the spring Budget, due to the freeze of income tax brackets and the corporate income tax rate increase,” the group said.

Autumn statement 2023
Chancellor Jeremy Hunt used his autumn statement last week to commit to the pensions triple lock (Stefan Rousseau)

A spokesman for the Prime Minister said the Government is “very clearly committed to the triple lock”.

The Chancellor announced a cut to national insurance for workers worth £10 billion in his autumn statement.

Nevertheless, the UK tax burden remains at historically high levels, as continuing freezing of income tax thresholds mean more people with growing wages are pushed into higher tax brackets.

Paul Johnson, director of the Institute for Fiscal Studies, said last week: “These tax cuts won’t be enough to prevent this from being the biggest tax-raising parliament in modern times.”

Elsewhere in its report, the OECD said that tackling inactivity in the labour market and “reducing policy uncertainty for business investment” would help stimulate economic growth.