What the Isle of Man tells us about the future of the pension triple lock

It’s a Monday morning in Douglas, Isle of Man — a city with as many care homes as schools.
Outside a seafront café four friends in their sixties and seventies are enjoying coffee in the sunshine. Paul Henry, Susan Watt and Mike and Lynn Halsall have lived in this island in the Irish Sea, about 90 miles from ­Liverpool, all their lives.
“It’s very safe for one thing, the island is still a lovely place with a lot to offer,” said Henry, 72. “Look at this view today. In about 10 minutes you can get to Snaefell, which is the highest point on the island, and it’s beautiful.”
Douglas feels sleepy. The island has a population of just under 85,000 but not enough young residents for a Nando’s or a Primark. Those out and about are mostly older, walking dogs while the tide is out or popping in and out of the shops.
It is hardly surprising. The Isle of Man, a self-governing Crown dependency with its own parliament, tax and benefits system, is favoured by the old. More than half its residents are 45 or over, according to its government’s 2023 population report, and 22.5 per cent are over 65. In the UK in 2022 (the last year for which official statistics are available) the over-65s make up about 19 per cent of the population. There is even a retirement home for old horses in the Isle of Man, located on the left-hand side of the winding road into Douglas.
And the population is getting older still. The birth rate is dropping, for which the government blames the cost of living and housing, while life expectancy is going up. By 2042 some 28 per cent of the population is expected to be retired while the number of working people is predicted to fall from 53,101 (63 per cent of the population) in 2021 to 48,996 (59 per cent) by 2042.
It means there will not be enough workers around to fund the pensioners. The government has warned that its state pension fund will run out by 2047, which is why it is considering scrapping the triple lock for those who reached state pension age after April 2019. The triple lock in the Isle of Man is identical to the UK’s, meaning payments are guaranteed to go up in line with wages, inflation or 2.5 per cent, whichever is highest.
The four coffee drinkers are not keen on the idea. Mike, 73, a retired police officer, said: “I paid in for over 50 years, I wouldn’t be happy at all, and I won’t be happy if they don’t give us the triple lock again next April.”
Lynn agreed, albeit a bit less vociferously. “A bit more pension would be nice.” Lynn is 66 and still works part-time as a nurse as well as getting her pension.
• What is the state pension triple lock?
The Manx parliament, the Tynwald, will discuss the triple lock proposal on Tuesday as it considers how to stop its national insurance fund running out in less than 25 years.
In the Isle of Man a full new state pension is worth £241.50 a week for those who reached state pension age after April 2019. Those who retired before that get an average of £229 a week, partly funded by the British government. In the UK, those who retired after April 2016 get £221.20 a week from the full new state pension, while those who retired before get £169.50 from the old basic state pension.
Since 1948 the payments, plus some other benefits, have come from an island fund built up from employer and employee national insurance contributions. In years when more is paid in than claimed, the fund builds up to cover years where claims exceed contributions.
Deficits, including an £8 million gap this 2024-25 financial year, are becoming more common. The fund is forecast to peak at £1.2 billion in 2027, then to slowly empty out.
The Manx government increased the state pension age to 66 between 2018 and 2020, in line with the UK, and it will rise to 68 by 2046, but that is not enough. The government also wants to boost the population to 100,000 by 2037 by attracting more working people through incentives such as reimbursing employees’ national insurance contributions of up to £4,400 in their first year.
Even the Isle of Man’s status as a tax haven, with no capital gains tax, inheritance tax and corporation tax for many businesses, is under pressure from its population problem. The top rate of income tax, paid on earnings above £21,000 a year, was put up from 20 to 22 per cent in April to boost funding for a health service that is over budget.
• How much will the state pension rise in 2025?
The 11 per cent rate of employee national insurance is higher than the 8 per cent that UK workers pay. Among the government’s options are raising it further to shore up the fund, or dropping the triple lock and increasing the state pension in line with inflation or inflation plus 1 percentage point. Changes could be part of the government budget in February.
If inflation was 2 per cent for the next ten years and the new Manx state pension rose in line with that rather than the triple lock minimum of 2.5 per cent, pensioners would get about £294 a week instead of £309 — some £780 a year less.
“We have had repeated reports over the past 20 years about the long-term future of the fund and how it will run out in the next couple of decades, and that time has shortened,” said Alex Allinson, the Isle of Man’s treasury minister.
“The triple lock has done the job, but if you carry on with it you’re disadvantaging the working people paying into the system, and we need to do something to redress that balance. The pressures that are facing us are in many ways exactly the ones facing the UK.”
The shortage of funds going in to the government’s coffers comes down to the fact that it doesn’t have enough workers to counterbalance its retired population. And that means it doesn’t have enough young people.
When it comes to attracting residents, the views, the quietness and the safety of the Isle of Man are the selling points that come up a lot. But while it might be a popular place to retire, it holds less appeal for youngsters. Of the 2,700 people who left the Isle of Man between May 2021 and March 2023, 32 per cent were aged 20 to 29, according to the Manx government.
“There’s nothing here for the young ones to do,” said Lynn.
There are about a thousand students at University College Isle of Man, which offers further education courses and degrees. But roughly half the young people go to university overseas, usually the UK, and only about half of them come back.
It is not hard to get a job here because the small population means there are always vacancies. But nearly half the Isle of Man’s economy is built around financial and professional services and egaming, so it can be a hard if those are not for you.
• The retirement rethink: is it time to tear up your pension plans?
When it comes to what is going on in the Irish sea, politicians and pensioners in the UK should be taking notes.
“These issues are absolutely going to become more apparent here and hard choices will need to be made,” said David Sinclair from the International Longevity Centre, a UK think tank.
The proportion of the UK population aged 65 and over is expected to rise to 24 per cent by 2043. The Office for Budget Responsibility (OBR) forecasts that spending on pensioners, including the state pension, will rise from £141.7 billion in 2023-24 to £182.7 billion by 2029-30.
As in the Isle of Man, there could be fewer working people to pick up the tab. There were 591,072 children born in England and Wales last year — the lowest number since 1977, and the fertility rate of 1.44 births per woman was an all-time low. The OBR estimates that by 2074 there will be 47 over-65s for every 100 working people, up from 31 now Before long the UK will face the same challenge as the Isle of Man.
Allinson would not say whether he thought the chancellor, Rachel Reeves, should look at scrapping the triple lock. The new Labour government has committed to keeping it, and state pensions will rise 4.1 per cent in April, in line with wage growth.
• Most people have no idea they’re taking a huge pension risk
Payments will be worth £230.25 a week for those who retired after April 2016, and £176.45 for those who get the old state pension. But Sinclair suggested that the lock cannot last without higher taxes or another increase to the state pension age.
“Within the next five years the government will have to address the cost because the bill isn’t going to decline,” said Sinclair. “If you want to keep the percentage of workers to nonworkers the same as it is now, the state pension age would need to be 71. Doing nothing isn’t an option.”
Tom McPhail from the financial consultancy the Lang Cat said: “The triple lock has hardwired into the system a state pension that will always become bigger compared to the rest of the economy, because it always gets the best of the three things. You can’t keep doing that forever because the state pension will absorb more and more of the economy.
“It’s all got to be paid for, and some poor politician at some point will have to make the decision to turn it off again. We arguably need a more generous state pension in overall terms, but I suspect that we will move to an older state pension age, say 70, and get rid of the triple lock.”