-
Don’t abandon State Pension triple lock just because of
one year’s figures
-
Triple lock is not a sensible policy – it’s a political
construct that has acquired totemic significance
-
We need a comprehensive review of all aspects of
pensioner support, not constant tinkering with parts of
it
-
Take the political meddling away and let’s have a
sensible retirement income system for all
State pension triple lock is an inefficient policy
tool, but has proved a really potent political one. The
State Pension ‘triple lock’ has become a totemic symbol of
Government support for pensioners and, as with so many other
aspects of retirement benefits, politicians are always frightened
of being seen to ‘take something away’ from pensioners.
UK state pension is lowest in the developed world –
it is not a generous amount: It is also important to
bear in mind that the UK pays the lowest state pension in the
developed world. Millions of pensioners – especially women - rely
solely on state pensions because they did not have the
opportunity to build up private pensions when younger. Of course,
there are others who are extremely well-off in retirement, but
that applies more to younger pensioners than the much older
people. This divide must be considered when making proposals for
change.
A comprehensive review of State pensioner support
is needed, not political tinkering all the time: I think
there should be a wholesale review of state pension income, with
all the various parts considered holistically. Over the years,
politicians have added so many parts to pensioner support,
originally introduced for political gain, but which then became a
fixture. These include tax free benefits like a Christmas Bonus,
Winter Fuel Payments, Age Addition, free travel, free
prescriptions, etc. These are all state pensioner income and have
additional costs for taxpayers which are not well targeted. This
complex patchwork of pensioner support has grown up over the
years due to constant political meddling and needs an
overhaul.
There is great misunderstanding of how the triple
lock works – it only protects two parts of the State Pension and
benefits younger pensioners most, not the poorest: The
complexity of the state pension system has allowed a policy that
does not offer top protection to the oldest and poorest
pensioners, to become a voter yardstick of how much the
Government values pensioners! It only applies to two elements of
the multi-part State Pension - the old Basic State Pension (paid
to those over age 70 and currently £137.60 a week), and the full
new State Pension £179.60 a week which is only paid to those who
reached state pension age since 2016. Thus, the youngest
pensioners have around £40 a week more triple lock protection
than the older ones.
Pension Credit for the poorest pensioners is not
triple locked: In addition to favouring the younger
pensioners, the triple lock does not cover the poorest, who rely
on Pension Credit. This is only legally required to rise in line
with average earnings. All the other elements of the National
Insurance state pension (such as SERPS, State Second Pension,
deferred pension, additional pensions) only have to rise in line
with cpi price inflation.
Triple lock is not sensible, but it is the 2.5%
element that makes no sense as a long-term goal – a double lock
has merit: The State Pension triple lock was designed to
demonstrate that the Coalition Government was determined to
support pensioners, even while other benefits were being reduced
in the efforts to cut benefit spending. However, it was never a
sensible long-term policy. But the part of the triple lock which
makes no sense is the 2.5%. Moving to a double lock makes more
sense – ensuring pensioners receive the best of earnings or price
inflation so they do not fall behind the rest of society.
Wrong to abandon earnings link because of one
year’s figures - with a double lock, pensioners would still
receive the increase in average earnings: Even though
the triple lock is imperfect as a means of pensioner support,
especially for the poorest, just scrapping it because there is
one year that seems out of line with expectations seems wrong.
The earnings increase in the three months to July is used to
determine the rise in State Pensions next year, and could be as
high as 8%. However, removing the earnings link because of one
year’s numbers would be yet another short-term
politically-inspired reform to a policy that needs long-term and
holistic reconsideration. The problem is that any suggestion of
changing a part of it raises fears of an ‘attack’ on
pensioners.
So I don’t believe we should remove the earnings
link this year, but should review the whole structure of state
pension support for the long-term future: A
comprehensive, independent review of state pensions is required.
This could include considering rolling all the tax free add-ons
into a better state pension. This would simplify the system, as
well as raising money by making the current tax-free benefits
taxable. Political interference has left us with a state pension
system comprising so many parts that nobody really knows what
they will receive. Removing short-term political meddling would
also be a huge advantage in policy of the future.
