Govt could save £1bn by altering triple lock

The government could to save almost £1bn if it altered the way in which it indexes state pensions.

The Department for Work and Pensions has refused to confirm whether Chancellor George Osborne will use September's CPI to set next year's pension increase, as normal, or use a different month's CPI.

CPI has rocketed this year from 4.5% in April to 5.2% in September. The Office for Budget Responsibility (OBR) predicts CPI will fall to around 2% by Q2 of 2012.

Webb revealed on Monday the government would save £0.9bn if it set state pensions to increase by March's expected inflation instead of September's CPI.

In response to a written question from Rachel Reeves shadow chief secretary to the Treasury, Webb confirmed raising state pensions by September's inflation level will cost the government £4.6bn.

Using next year's anticipated inflation will cost £3.7bn, Webb said.

The news comes after the government amended its reforms to the state pension in a move that will cost the Exchequer an extra £1.1bn.

The change ensured the raise in the state pension age (SPA) to 66 by 2020 will not leave anyone facing a delay of more than 18 months for their pensions, rather than the two years originally proposed.