Prime minister David Cameron is reportedly determined to keep the triple lock guarantee on pensions despite research showing it could ultimately cost five times more than expected.
The Times reports Cameron is fighting to keep the policy in the same way he has retained universal winter fuel allowance and other pensioner benefits.
The triple lock guarantees pensions will rise at a minimum of inflation, earnings or 2.5 per cent, whichever is highest.
The Institute of Fiscal Studies warns the triple local is “not affordable” and will already cost the Government £6bn more by 2060. The Times reports the Treasury is considering further increases to the retirement age, which is due to rise to 67 in 2028, to bring down costs.
The policy is not set in legislation and the pensions bill only guarantees a rise linked to earnings, with Work and Pensions Secretary Iain Duncan Smith refusing to write the triple lock into law.
Pensions minister Steve Webb also questioned whether the triple lock could continue beyond the next election, claiming all parties will need to re-think their positions.
Shadow chancellor Ed Balls cast doubt over Labour’s commitment to the policy after he included pensions in an overall welfare spending cap. He has since insisted he supports the policy.
Chancellor George Osborne excluded pensions spending from his overall welfare cap in last month’s spending review.